2020 Tax update

 Dear Valued Client, 

For 2020, there have been several tax changes signed into law that affects the year 2020 and beyond. They were the Coronavirus Aid, Relief, and Economic Security Act (CARES) and the Setting Every Community Up for Retirement Enhancement Act (SECURE); not to mention last years’ significant Tax Cuts and Jobs Act that affects taxpayers through 2025. 

The CARES Act involved stimulus payments and additional $600 unemployment for taxpayers. One significant change under the SECURES Act, it repealed the maximum age for traditional IRA contributions from 70 ½ to 72. 

Many hours were incurred studying the new Acts. Tax changes affecting most taxpayers for 2020 are: 

• There were cosmetic changes to Form 1040 for 2020 with a few more lines for reporting information to the IRS. 

• IMPORTANT: We need to know the amounts you received for the first and second economic stimulus payment.  these amounts are not taxable nor do they need to be repaid.  They are reconciled and if the treasury department owes you more they will add the payment to your tax refund as a credit. 

• The favorable individual lower tax rates for 2020 remained unchanged, including corporations. 

• Taxpayers, who itemized prior to 2019, may find it advantageous again to use the NEW standard deductions this year. The 2020 standard deduction for Married Filing Jointly and Surviving Spouses is $24,800 (up from $24,400) and a Single and Married Filing Separate taxpayer is $12,400 (up from $12,200). Personal exemptions are no longer available, which in theory, is included in the NEW standard deduction. If there is an addition to the household, I would need a copy of their SS card and date of birth. Also, I will need to know if a 2019 dependent is no longer a dependent in your household. If you itemized in the past, you may continue to gather those deductions this year and I can determine which deduction is to your tax advantage…taking the new standard deduction or continue to itemize. 

•  Independent over-the-road truck drivers and traveling salespeople (as an employee) will again be no longer permitted to deduct their meals, lodging, travel, and auto expenses. I would suggest contacting your employer and ask for financial consideration to cover some or all those lost deductions. 

• As with 2019, state and local income taxes and real estate taxes are still deductible but are limited to $10,000 for married and single taxpayers of $5,000 for married filing separate who itemize. 

• As with 2019, taxpayers who are engaged in a trade or business, including partnerships and S Corporations, with a profit are eligible for a NEW 20% DEDUCTION subtracted from your taxable income. This deduction computation is complex; however, the tax savings can be substantial. Since the 20% deduction calculation is complicated, which requires additional time, a separate line item will be added to your invoice entitles “Special 20% Calculation.” 

• We have a new policy this year that if you want to guarantee completion by April 15th you must have ALL of your documents to us by March 31st

Also, please bring your driver’s license and spouse’s, if applicable, (or copy) with you. 

I hope this information was helpful in assisting you in filing your tax return this year. 

Thank you for your business!