In a whipsawing stock market, conversions can also be partial. “Values of various positions in an account may be lower than before Covid-19 because of the decline in the market,” said Kim Bourne, CPA/CFP, CEO and founder of Playfair Planning Services in New York. “Specific securities can be converted.”
Clients need to be readied to make a conversion should the market dip deeply again, Neher added.
Clients who own businesses need to know that the $500,000 limit on claiming a business loss ($250,000 for single taxpayers) in a single tax year has been removed. “Now any amount of business loss can be applied in 2020,” Bourne said. “Another tax law change is on how a net operating loss is counted. Business owners can now look back five years. Examine previous years’ returns and count those losses.”
Looks back might also be needed after the Coronavirus Aid, Relief and Economic Security (CARES) Act fixed a drafting error from 2017 tax reform that omitted qualified improvement property from the list of property with a 15-year life, Rubenstein said. CARES also removed the limitation for excess business losses for 2018 through 2020, possibly creating business net operating losses that can now be carried back to previous years, and eased the limit of interest expense. And “taking advantage of the Section 199A deduction for qualified business income should be on the front of every business owner’s mind,” Rubenstein added.
Do your clients have to make decisions right now? What if more relief is coming? “Planning should be ongoing throughout the year, even in these times,” Rubenstein said. “Waiting for more tax relief is not a good idea—there’s no guarantee that more help is on the way.”