California Wildfire Relief from the IRS

Wildfire victims in parts of California now have until Jan. 3, 2022, to file various individual and business tax returns and make tax payments. Currently, this includes Lassen, Nevada, Placer, Plumas, Tehama and Trinity counties. Any jurisdiction added to the FEMA declaration will automatically receive the IRS relief.

This relief postpones various tax filing and payment deadlines that occurred starting on July 14, 2021. As a result, affected individuals and businesses will have until Jan. 3, 2022, to file returns and pay any taxes that were originally due during this period. This means individuals who had a valid extension to file their 2020 return that ran out on Oct. 15, 2021, will now have until Jan. 3, 2022, to file. The IRS noted, however, that because tax payments related to these 2020 returns were due on May 17, 2021, those payments are not eligible for this relief.

The Jan. 3, 2022 deadline also applies to quarterly estimated income tax payments due on Sept. 15, 2021, and the quarterly payroll and excise tax returns that were due on Aug. 2 and Nov. 1, 2021.

The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. Therefore, taxpayers do not need to contact the agency to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2021 return that is normally filed next year), or the return for the prior year (2020).

IRS Announces Higher Retirement Contribution Limits For 401(k)s But Not IRAs

The Internal Revenue Service announced that the amount individuals can contribute to their 401(k) plans will increase to $20,500 in 2022, up from $19,500 for 2021 and 2020. Contribution limits for 403(b), most 457 plans, and the federal government's Thrift Savings Plan also increase to $20,500. The catch-up contribution limit for employees aged 50 and over remains unchanged at $6,500. Therefore, participants who are 50 and older can contribute up to $27,000 starting in 2022.

The amount individuals can contribute to their SIMPLE retirement accounts will increase from $13,500 to $14,000. The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE plans remains unchanged at $3,000.

The 2022 limit on annual contributions to an IRA remains unchanged at $6,000. The IRA catch-up contribution limit for individuals aged 50 and over remains $1,000.

IRS Offers Guidance for Employers Rehiring Retirees

To help address COVID-related labor shortages, the Internal Revenue Service has stated that employers generally will not jeopardize the tax status of their pension plans if they rehire retirees or permit distributions of retirement benefits to current employees who have reached the plan’s normal retirement age.

Many employers, including governmental employers (such as public school districts), are looking for ways to encourage retirees to return to the workforce and fill open positions caused by the pandemic. Employers are also looking for ways to encourage their experienced employees to stay on the job.

The IRS released two new FAQs (https://www.irs.gov/.../coronavirus-related-relief-for...) that are designed to offer technical guidance to public and private employers who sponsor pension plans for their employees. The FAQs highlight existing ways that employers can meet their employment objectives and still comply with the plan qualification rules.

Under the FAQs, an employer can generally choose to address unforeseen hiring needs by rehiring former employees, even if those employees have already retired and begun receiving pension benefit payments. Also, if permitted under plan terms, those employees may continue receiving the benefits after they are rehired. Moreover, an employer can generally choose to make retirement distributions available to existing employees who have reached age 59 ½ or the plan’s normal retirement age. This may assist in the retention of employees eligible for retirement.