Global population is projected to peak at 9.7 billion in 2064 and decline to 8.8 billion by the end of the century, according to a study from the University of Washington Institute for Health Metrics and Evaluation. The reversal of population growth — already in progress in some countries — is due primarily to women’s better access to education and contraception.
By 2100, 183 of 195 countries will not have fertility rates necessary to maintain their current populations, with 23 countries shrinking by more than 50%. By contrast, the population of sub-Saharan Africa is projected to triple, and almost half the world’s population will live in Africa and the Middle East.
Due Date Approaches for 2020 Federal Income Tax Returns
Tax filing season is here again. If you haven’t done so already, you’ll want to start pulling things together —that includes getting your hands on a copy of your 2019 tax return and gathering W2s, 1099s, and deduction records. You’ll need these records whether you’re preparing your own return or paying someone else to prepare your tax return for you. Don’t procrastinate. The filing deadline for individuals is generally Monday, May 17, 2021.
Filing for an Extension
If you don’t think you’re going to be able to file your federal income tax return by the due date, you can file for and obtain an extension using IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. Filing this extension gives you an additional five months (to October 15, 2021) to file your federal income tax return. You can also file for an extension electronically — instructions on how to do so can be found in the Form 4868 instructions.
Filing for an automatic extension does not provide any additional time to pay your tax. When you file for an extension, you have to estimate the amount of tax you will owe and pay this amount by the May filing due date. If you don’t pay the amount you’ve estimated, you may owe interest and penalties. In fact, if the IRS
believes that your estimate was not reasonable, it may void your extension.
Note: Special rules apply if you’re living outside the country or serving in the military and on duty outside the United States. In these circumstances, you are
generally allowed an automatic one month extension (to June 15, 2021) without filing Form 4868, though interest will be owed on any taxes due that are paid after the May filing due date. If you served in a combat zone or qualified hazardous duty area, you may be eligible for a longer extension of time to file.
What If You Owe?
One of the biggest mistakes you can make is not filing your return because you owe money. If your return shows a balance due, file and pay the amount due in full by the due date if possible. If there’s no way that you can pay what you owe, file the return and pay as much as you can afford. You’ll owe interest and possibly penalties on the unpaid tax, but you’ll limit the penalties assessed by filing your return on time, and you may be able to work with the IRS to pay the remaining balance (options can include paying the unpaid balance in installments).
Expecting a Refund?
The IRS has stepped up efforts to combat identity theft and tax refund fraud. More aggressive filters that are intended to curtail fraudulent refunds may inadvertently delay some legitimate refund requests. In fact, the IRS is required to hold refunds on all tax returns claiming the earned income tax credit or the additional child tax credit until at least February 15. Most filers, though, can expect a refund check to be issued within 21 days of the IRS receiving a tax return. However, note that in 2020 the IRS experienced delays in processing 2019 paper tax returns due to limited staffing during the coronavirus pandemic. So if you are expecting a refund on your 2020 tax return, consider filing as soon as possible and filing electronically.
Test Your Knowledge of College Financial Aid
Financial aid is essential for many families, even more so now in light of COVID-19. How much do you know about this important piece of the college financing
- If my child attends a more expensive college, we’ll get more aid
Not necessarily. Colleges determine your expected family contribution, or EFC, based on the income and asset information you provide on the government’s financial aid form, the Free Application for Federal Student Aid (FAFSA), and, where applicable, the College Scholarship Service (CSS) Profile (a form generally used by private colleges). Your EFC stays the same no matter what college your child attends. The difference between the cost of a particular college
and your EFC equals your child’s financial need, sometimes referred to as “demonstrated need.” The more expensive a college is, the greater your child’s financial need. But a greater financial need doesn’t automatically translate into a bigger financial aid package. Colleges aren’t required to meet 100% of your child’s financial need.
Tip: Due to their large endowments, many elite colleges offer to meet 100% of demonstrated need, and they may also replace federal student loan awards with college grants in their aid packages. But not all colleges are so generous. “Percentage of need met” is a data point you can easily research for any college. This year, though, some colleges that are facing lower revenues due to the pandemic may need to adjust their financial aid guidelines and set higher thresholds for their aid awards.
- I lost my job after submitting aid forms, but there’s nothing I can do now
Not true. Generally, if your financial circumstances change significantly after you file the FAFSA (or the CSS Profile) and you can support this change with documentation, you can ask the financial aid counselor at your child’s school to revisit your aid package; the financial aid office has the authority to make adjustments if there have been material changes to your family’s income or assets. Amid the pandemic, annual income projections for some families may now look very different than they did two years ago based on “prior-prior year” income (see graphic). Families who have lost jobs or received cuts in income may qualify for more aid than the FAFSA first calculated.
Tip: Parents should first check the school’s financial aid website for instructions on how to proceed. An initial email is usually appropriate to create a record of correspondence, followed by documentation and likely additional communication. Keep in mind that financial aid offices are likely to be inundated with such requests this year, so inquire early and be proactive to help ensure that your request doesn’t get lost in the shuffle.
3. My child won’t qualify for aid because we make too much money: Not necessarily. While it’s true that parent income is the main factor in determining aid eligibility, it’s not the only factor. The number of children you’ll have in college at the same time is a significant factor; for example, having two children in college will cut your EFC in half. Your assets, overall family size, and age of the older parent also factor into the equation.
Tip: Even if you think your child won’t qualify for aid, there are still two reasons to consider submitting the FAFSA. First, all students, regardless of family income, who attend school at least half-time are eligible for unsubsidized federal Direct Loans, and the FAFSA is a prerequisite for these loans. (“Unsubsidized” means the student pays the interest that accrues during college, the grace period, and any loan deferment periods.) So if you want your child to have some “skin in the game” by taking on a small student loan, you’ll need to submit the FAFSA. Second, the FAFSA is always a prerequisite for college need-based aid and is sometimes a prerequisite for college merit-based aid, so it’s usually a good idea to submit this form to maximize your child’s eligibility for both.
- We own our home, so my child won’t qualify for aid
It depends on the source of aid. The FAFSA does not take home equity into account when determining a family’s expected family contribution, so owning your home won’t affect your child’s eligibility for aid. The FAFSA also excludes the value of retirement accounts, cash-value life insurance, and annuities.
Tip: The CSS Profile does collect home equity and vacation home information, and some colleges may use it when distributing their own institutional need-based aid.
Tax Filing Information for Coronavirus Distributions
In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The legislation included a provision that allowed qualified retirement plan participants and IRA account holders to take penalty-free early distributions totaling no more than $100,000 between January 1 and December 31, 2020. If you took advantage of this measure, here’s what you need to know for tax filing.
What Is a Coronavirus Distribution?
In order for a distribution to be qualified under the CARES Act, it must have been made to a qualifying individual before December 31, 2020. You qualify if you, your spouse, or dependents were diagnosed with the virus, or if you, your spouse, or someone who shares your principal residence experienced a pandemic-related financial setback as a result of:
• A quarantine, furlough, layoff, or reduced work hours
• An inability to work due to lack of child care
• Owning a business forced to close or reduce hours
• Reduced pay or self-employment income
• A rescinded job offer or delayed start date for a job
The Three-Year Rules
A key provision in the Act allows the distribution(s) to be spread “ratably” over three years for purposes of calculating tax payments. In other words, the total can be reported in equal amounts on your 2020, 2021, and 2022 tax returns. For example, if you received a $15,000 distribution, you could report $5,000 in income for each of the three years. However, if you prefer, you can generally report the entire distribution in your 2020 tax filing. Another provision allows you to repay all or a part of your coronavirus distribution to an eligible retirement plan within three years from the day after the date the distribution was received. Repayments will be treated as if you enacted a trustee-to-trustee transfer, and no federal income taxes will be owed. (A repayment to an IRA is not considered a rollover for purposes of the
one-rollover-per-year rule.) If you pay your income taxes prior to repaying the distribution, your repayment will reduce the amount of the distribution income you report in a subsequent year. Or instead, you may file an amended return, depending on your specific situation. Consider speaking with a tax professional before making any final decisions.
How to Report Distribution Income
If you received a coronavirus distribution(s) in 2020, you should use Form 8915-E, Qualified Disaster Retirement Plan Distributions and Repayments, to report the income as part of your 2020 federal income tax filing. You can also use this form to report any recontribute amounts.
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