Pub. 2 2020 Issue 5

13 nebraska society of cpas W W W . N E S C P A . O R G For more information, contact Western CPE’s customer service center at (800) 822-4194 or wcpe@westerncpe.com. ©2020 Sharon Kreider and Vern Hoven Results Realized Collaborating with Companies and CPA Firms on: − State Tax Audits − State Tax Appeals − State Tax Planning − State Tax Incentives − State Business Incentives − Site Development Incentives − Property Tax Appeals McGrath North  First National Tower, Suite 3700  1601 Dodge Street  Omaha, NE 68102 www.mcgrathnorth.com  www.nebraskastatetax.com Matt Ottemann, JD, LLM State & Local Tax & Incentives Attorney Partner, McGrath North 402-633-9571 mottemann@mcgrathnorth.com Nick Niemann, JD State & Local Tax & Incentives Attorney Partner, McGrath North 402-633-1489 nniemann@mcgrathnorth.com 2. being unable to work due to lack of childcare due to COVID-19, 3. closing or reducing hours of a business they own or operate due to COVID-19, 4. having pay reduced, including self-employment income, due to COVID-19, or 5. having a job offer rescinded or start date for a job delayed due to COVID-19. TheNotice alsoprovides guidance andexamples onhowqualified individualswill reflect the tax treatment of these distributions and loans on their federal tax return. For details on the Coronavirus- related relief for retirement plans and IRAs, read the IRS FAQs at https://www.irs.gov/newsroom/coronavirus-related-relief-for- retirement-plans-and-iras-questions-and-answers. Planning. IRA — Money may be short for many of our small business clients, and they may be tempted to pull money from their IRAs. Remind your client that if a “qualified individual” takes an early IRA distribution, the distribution is still taxable— ratable over three years unless the taxpayer elects to include all of the distribution in 2020. Only the 10% penalty is waived. Pension Loan — If the client chooses to borrow from his or her 401(k) account instead, the loan must be paid back. Eighty percent of borrowers who lose or leave their job, do not (cannot) repay the loan and have a resulting taxable event. 4. QualifiedOpportunity Fund Investment Delay. Notice 2020- 39 allows additional time to taxpayers who sold a property for an eligible gain and who would have had 180 days to invest in a Qualified Opportunity Fund (QOF) to defer that gain. The Notice provides that if a taxpayer’s 180th day to invest in a QOF would have fallen on or after April 1, 2020, and before December 31, 2020, the taxpayer now has until December 31, 2020, to invest that gain into a QOF. (The 180th day for some of these taxpayers was already postponed through July 15, 2020, under Notice 2020-23.) Also, the Notice provides the period between April 1, 2020, and December 31, 2020, is suspended for purposes of the 30 months during which property may be substantially improved. Other relief on the 90% asset test and the working capital safe harbor is provided in the Notice. Read more about Notice 2020-39 at https://www.irs.gov/ newsroom/irs-provides-answers-about-coronavirus-related- tax-relief-for-qualified-opportunity-funds-and-investors. Read the updated IRS FAQs regarding Opportunity Zones and QOFs at https://www.irs.gov/credits-deductions/ opportunity-zones-frequently-asked-questions#qof. Planning. If your client defers gain into a QOF, a Form 8897, Initial and Annual Statement of Qualified Opportunity Fund Investments, is required. View Form 8897 at https://www.irs.gov/pub/irs-pdf/f8997.pdf t