Our Blog

January 6, 2020

New 2020 tax law changes will impact retirement accounts and extend many expired or expiring tax laws. Some taxpayers will want to amend their 2018 tax return due to the Extender Provisions, and others will want to review their estate planning strategies due to the unfavorable changes that apply to inherited retirement accounts. Consult with our tax professionals to assess your personal financial details.

We encourage new clients to schedule a face-to-face consultation with any of our tax professionals.

Existing and new clients are welcome to utilize our “No Waiting” drop-off service during tax season. We usually complete dropped-off returns in about a week. Complex or incomplete tax documents can delay completions, take longer than one week, and may require an extension for filing the tax return.

Remember: tax payments are always due by the normal quarterly and annual deadlines, regardless of extensions for filing a return. If you must submit an extension, the estimated tax due needs to be paid with the extension.


To our clients:

In late December, the US Congress passed a range of tax law changes and extended over two dozen expired or expiring rules. We urge our clients to review these and contact us with specific questions.


New tax law changes affecting retired taxpayers.

President Trump signed legislation December 20, 2019 that includes tax law changes that will affect many retired taxpayers.

The SECURE Act (Setting Every Community Up for Retirement Enhancement) includes the following highlighted changes:

As of January 01, 2020, RMDs begin at age 72, instead of age 70-1/2 for those born after June 30, 1949.



While accumulating a nest egg for retirement, a 401(k), SEP, and/or IRA are an excellent way for working taxpayers to contribute some current earnings and defer the taxes until retirement. Employer matches and low management fees help optimize these investments

In retirement, these accounts shift from contributions, to distributions. The tax law requires retirement account owners to take taxable distributions from these accounts. The smallest amount that must be distributed each year is the “Required Minimum Distribution” (RMD).

Prior to 2020, the annual RMD starts when the taxpayer turned 70-1/2. After 2019, this has been extended to age 72.

This benefits retirement account owners with birthdates after 06/30/1949, allowing one or two extra years (depending on the birthdate) for these accounts to grow, tax deferred.

We continue to advise clients to have their specific situation reviewed every few years to see if and when it is beneficial to take additional distributions. For example, a partial conversion to a ROTH IRA at a low tax rate may be optimal for some clients who currently pay a tax rate that is lower than they expect in the future.

BEWARE: The penalty for not taking an annual RMD is 50% of the RMD amount! Yikes! Don’t let this happen.


Are you working past age 70-1/2? Now you can continue to contribute from wages to your IRA at any age.

Previously, the tax law did not allow a working taxpayer to contribute to their IRA after reaching age 70-1/2. Now, there is no maximum age; it has been repealed beginning in tax year 2020.

Example: All working taxpayers may now contribute to their IRA for tax year 2020, based on their 2020 earned income. Note: This is not retroactive; taxpayers born before 07/01/1949 are still prohibited from contributing to an IRA for 2019.


Are you working part-time? You may qualify for your employer’s 401(k) plan.

Previously, the tax law allowed employer to exclude part-time workers. Beginning in 2020, working 500 hours in three consecutive years may qualify an employee to participate in the employer 401(k) plan. Exceptions apply, including collectively bargained plans.


The “Stretch IRA” has been eliminated. Beneficiaries could experience a severe tax hit.

After 2019, the tax consequences have changed drastically for inherited retirement accounts.

The good news: Spouses and other exceptions still qualify to “stretch” the distributions from inherited retirement accounts over the beneficiary’s lifetime. The exceptions include minor children, disabled or chronically ill individuals, and an individual who is not more than 10 years younger than the account owner.

The bad news: Beginning in 2020, non-spouse beneficiaries must distribute the entire account within 10 years. Heirs with higher income could be pushed into even higher tax brackets for up to 10 years following the inheritance. If the timing of the inheritance coincides with an heir’s highest earning years, the tax impact could be severe.

The tax change that eliminates the “stretch IRA” can ruin the plans to transfer wealth via inheritance. The overall percentage lost to taxation is relative to the account balances, the age of the beneficiaries, and the effective tax rate due when the inheritance must be withdrawn. The greatest impact will be for larger accounts, younger and/or few beneficiaries, and higher future tax rates. For example, a single beneficiary who inherits an IRA of $750,000 could invest at 6% and add $100,000 to their taxable income each year for 10 years. If this single taxpayer already had $200,000 of income, the additional $100,000 would be taxed at 32% for federal tax, before any state or local income tax.


Actions to take by impacted taxpayers:

Tax Professional: Impacted taxpayers should consult with their tax advisor on the potential impact based on current account balances and the mix of potential beneficiaries. This analysis could involve estimates of beneficiary’s expected tax rates in future years (working vs. retired).

Financial Advisor: Depending on the impact, taxpayers might change their wealth transfer strategies including Roth conversions, Life Insurance and other trust arrangements.

Attorney: Also confirm with an attorney that any trust documents still meet the intended wealth transfer plans in light of this tax law change. If not, changes should be made.


2019 Extender Provisions

The Extender Provisions passed on December 20, 2019 include over two dozen expired or expiring tax deductions or credits. A few of these are listed below.

Action to take: Impacted taxpayers may benefit from amending their 2018 tax return.


Forgiven Debt on Principal Residence

Retroactive to 2018, the income realized from forgiven debt on principal residence is excluded from taxable income through December 31, 2020. This is reported on a 1099-C Cancellation of Debt, and can occur in a short sale or bankruptcy.


Itemized Deductions extended

The exclusion for out of pocket medical expenses was set at 10% beginning in 2019. This has been repealed and remains at 7.5% of Adjusted Gross Income (AGI) for 2019 and 2020.

The deduction for Mortgage Insurance Premiums (or Private Mortgage Insurance premiums (PMI)) are now deductible for tax years 2018 – 2020.


Tuition and Fees Deduction extended

The deduction for Tuition and fees deduction of up to $4,000 is extended for tax years 2018 – 2020.


Residential Energy Improvement Credits

Tax credits (with a lifetime maximum of $500 since 2005) for qualified home energy improvements are now available for tax years 2018 – 2020.

This legislation also extended tax credits for other improvements include qualified fuel cell motor vehicles, alternative fuel refueling property, wheel plug-in electric vehicle, and energy efficient home, among others.