Page 18 - Supplement to Income Tax 2020

Additions & Corrections to the Text of Your Income Tax 2020

Additions & Corrections to the Text of Your Income Tax 2020

Note to our readers: If you have the Professional Edition of J.K. Lasser’s can be used on the 2019 and/or 2018 return at the
Your Income Tax 2020, some of the corrections to the text and the
updates provided in the following pages may already be included in your taxpayer’s election. Also see page 4 of this Supplement.
edition. We regret any errors.
Empowerment zone QSB exclusion and rollover
provisions reinstated and extended (page 119). The
The page references in the boldface headings below
are to the text of J.K. Lasser’s Your Income Tax 2020. Taxpayer Certainty and Disaster Tax Relief Act reinstates
Page references within the items themselves (after the for 2018 and 2019, and also allows for 2020, the 60%
headings) are to the pages of this Supplement unless exclusion for gain on the sale of qualified small business
otherwise noted. stock (QSB) from an empowerment zone business if the
As explained at the beginning of this Supplement, stock was acquired before February 18, 2009. However,
the massive government funding legislation that was only gain attributable to periods before 2019 is eligible
signed into law on December 20, 2019 (the Further for the 60% exclusion.
Consolidated Appropriations Act, 2020), contains The new law also reinstates for 2018 and 2019 the
key tax changes covering several years. One part of election to defer gain from the sale of empowerment
the legislation, the Taxpayer Certainty and Disaster zone assets held over one year if the sales proceeds were
Tax Relief Act, reinstates provisions that expired at reinvested in replacement property within 60 days of
the end of 2017 and generally allows them for 2018 the sale. The election also applies for 2020 gains.
through 2020. It also provides tax relief for victims Qualified Opportunity Fund (QOF) regulations (pages
of major federally declared disasters. Also included 119–120). The IRS has provided guidelines on QOFs
in the legislation is the SECURE Act, which makes and qualified opportunity zone businesses; see page 6
many important changes for retirement plan of this Supplement.
participants and also for beneficiaries of inherited Age increased for starting retirement plan RMDs
accounts, starting in 2020 or later. The SECURE Act (pages 188, 237). The SECURE Act increases the age
also reinstates the pre-Tax Cuts and Jobs Act version at which required minimum distributions (RMDs)
of the Kiddie Tax computation starting in 2020, but must begin from traditional IRAs and employer
taxpayers can elect to apply the change for 2018 and/ plans, from 70½ to 72, provided you reach age 70½
or 2019. See pages 3-5 of this Supplement for details after 2019. See the new law discussion at page 4 of
on the tax law changes. this Supplement.
For future updates, visit jklasser.com.
No penalty for pre-59½ distribution upon birth of
Pending legislation (page xxxiv). All of the proposed child or adoption (pages 189, 233). The SECURE
law changes that were previewed on page xxxiv of Your Act provides a new exception to the 10% penalty for
Income Tax 2020 were enacted by Congress in the distributions before age 59½. Starting in 2020, up
Further Consolidated Appropriations Act, 2020. The to $5,000 may be withdrawn without penalty from
changes are discussed on pages 3–5 of this Supplement. a traditional IRA or employer retirement plan if it is
Kiddie tax (page 116, 497–500). As noted above, the withdrawn within one year of the birth of your child
SECURE Act repeals the rule (under the Tax Cuts and or one year from the date you finalize adoption of an
Jobs Act) that used the tax rates and brackets for trusts individual under age 18 or a person who is physically
and estates to figure the kiddie tax, and reinstates the or mentally incapable of self-support, but your
pre-TCJA rule that based the tax on the marginal tax spouse’s child is not an eligible adoptee. See the new
rate of the child’s parent for 2020, but the parental rate law discussion at page 4 of this Supplement.

14 | Supplement to J.K. Lasser’s Your Income Tax 2020