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Tax Season 2021

Click her for tax services brochure:  insert link here
IMPORTANT DATES
January 2, 2021:
  • Drake begins receiving PRE-ACK bank products and sending to banks for processing
  • Drake begins receiving 1040, 990 and 1120 for tax year 2020
  • Drake begins receiving 1040, 1041, 1120, 1120S, 1065, and 990 for prior years 2017 through 2019
  • Drake begins transmitting to the CA Franchise Tax Board
***The IRS has not yet released the date they will begin accepting business and individual tax returns.***

Jeanine and the licensed professionals (enrolled agents, certified public accountants, attorneys  --  see https://www.remotebusinesssolutionsinc.org/LicensesCertifications.php) in our network provide professional tax services (https://www.remotebusinesssolutionsinc.org/ProfessionalTaxServices.php ) for our clients.  These include tax research, tax preparation, tax review, tax paralegal under the supervision of a licensed attorney, and taxpayer representation. 

Please go to the RBSI Tax Center at https://cp7.cpasitesolutions.com/~bctincje/RBSIVirtualTaxCenter.php for specific tax services and details about our virtual tax center.  You may also want to print or refer to the Tax Due Dates      page for federal and your state/local department of revenue for state/local tax due dates, and mark relevant dates on your calendar as well.  The continuously updated Tax Season 2021 information is a subpage located at https://cp7.cpasitesolutions.com/~bctincje/TaxSeason2021.php  under our Announcements page

Some helpful links re final 2020 tax planning:

http://file:///C:/Users/Owner/Desktop/Year-end%20tax%20planning%20for%202020%20by%20Thomson%20Reuters.pdf 

http://file:///C:/Users/Owner/Desktop/year%20end%20payroll%20reminders%202020.pdf

For more information about Economic Impact Payments and the 2020 Recovery Rebate, key information will be posted on IRS.gov/eip. Later this week, you may check the status of your payment at IRS.gov/GetMyPayment. For other COVID-19-related tax relief, visit IRS.gov/Coronavirus.

Para obtener más información sobre los pagos de impacto económico y el reembolso de recuperación del 2020, la información clave se publicará en IRS.gov/es/eip.  Durante la semana, podrán revisar el estado de su pago en IRS.gov/GetMyPayment. Para otros alivios tributarios relacionados con COVID-19, visite IRS.gov/es/Coronavirus.

December 17, 2020 Westminster, CO based virtual business services provider Business Consulting & Taxation, Inc. | Tax Season 2021 Page | Remote Business Solutions, Inc. 

Re: Year-end letter for businesses

As we wrap up 2020, year-end tax planning has never been more crucial. This year brought challenges and disruptions that significantly impacted your personal and financial situations – COVID-19, economic relief measures, new tax laws and political shifts. Now is the time to take a closer look at your current tax strategies to make sure they are still meeting your needs and take any last-minute steps that could save you money.

We’re here to help you take a fresh look at the health of your tax and financial well-being. Please contact us at your earliest convenience to discuss your tax situation so we can develop a customized plan. In the meantime, here’s a look at some issues to consider as we approach year-end.

Key tax considerations related to COVID-19

Many tax provisions were implemented under the Families First Coronavirus Response Act (FFCRA), Coronavirus Aid, Relief and Economic Security (CARES) Act and other legislation aimed to help businesses and individuals deal with the COVID-19 pandemic and its ongoing economic disruption.

Payroll tax credits and tax deferrals  

  • Several payroll tax credits are available as part of the passed legislation to assist with the recovery of COVID-19. There is a refundable tax credit to assist employers in retaining employees. Also, subject to limits and exceptions, employers of less than 500 employees (including eligible self-employed individuals) are required to provide mandatory sick time and paid family leave but are eligible for payroll tax credits to offset the costs. Contact us if you would like to discuss how these might apply to your business. 
  • Employers (including self-employed individuals) can postpone the employer’s share of Social Security taxes through the end of this year. The delayed payments are due in two equal payments, one due Dec. 31, 2021 and the second due Dec. 31, 2022.

Small Business Administration (SBA) loans

  • Small businesses could apply for an Economic Injury Disaster Loan grant of up to $10,000 and this grant does not have to be repaid.
  • Small businesses could apply for a loan through the Paycheck Protection Program (PPP). This program is designed to help provide capital to cover the cost of retaining employees. If certain criteria are met, the loan can be forgiven. There is uncertainty around the deductibility of expenses related to loans that have been forgiven. We can help you with scenario planning to understand how this might affect you and your business.   

State tax obligations related to teleworking arrangements for employees

As the COVID-19 outbreak continues, many employers are encouraging or requiring their employees to work from home (i.e., telework). Such remote working arrangements could potentially have tax implications that should be considered.

Fraudulent activity remains a significant threat.

Our firm takes security seriously and your business should as well. Fraudsters continue to refine their techniques and tax identity theft remains a significant concern. Beware if you:

  • Receive a notice or letter from the Internal Revenue Service (IRS) regarding a tax return, tax bill or income that doesn’t apply to you
  • Get an unsolicited email or another form of communication asking for confidential information such as payroll or employee data
  • Receive a robocall insisting you must call back and settle your tax bill

Make sure you’re taking steps to keep financial information safe. Let us know if you have any questions or concerns about how to go about this.

The Affordable Care Act (ACA) and your taxes

The U.S. Supreme Court is expected to rule on the constitutionality of the ACA in 2021. Though many questions remain, the penalty that the ACA imposes on individuals who do not have health insurance was repealed. However, other aspects of the ACA are still in place. Contact us if you have questions about how this affects you.

Partnership audit and adjustment rules

New audit and adjustment rules are in effect. Careful planning today will help mitigate any unfavorable consequences on both the entity and the partners themselves. Also, be aware that even if your business isn’t a partnership, you’ll want to evaluate the effect these new rules could have if you’ve invested in any partnership.

Virtual currency/cryptocurrency

Virtual currency transactions are becoming more common. There are many different types of virtual currencies, such as Bitcoin, Ethereum and Ripple. The sale or exchange of virtual currencies, the use of such currencies to pay for goods or services or holding such currencies as an investment generally has tax consequences. We can help you understand those consequences. 

Other tax matters to note

  • Purchases of property and equipment – With tax-favorable options available to businesses, many purchases can be completely written off in the year they are placed in service. Plus, there were tax-favorable rules passed in the CARES Act that permit qualified improvement property to qualify for 15-year depreciation and, therefore, also be eligible for 100% first-year bonus depreciation. Let us help you receive the best tax treatment.
  • Methods of accounting – More businesses can use the cash method of accounting. This can be helpful for cashflow purposes and is simpler than the accrual method. There are qualifications that must be met, but we can help you understand if your business would benefit.  
  • Preparing for disasters – Do you have a disaster recovery plan in place for your business and, if so, have you updated it recently? We can help you review your plan, especially as it relates to financial information.
  • Sales and use tax considerations – The 2018 U.S. Supreme Court ruling in the case South Dakota v. Wayfair, Inc. affects where some businesses must file and pay sales and use tax. States are still making changes to their laws and filing requirements. Please ask us how this case impacts your business.
  • Retirement plans – Have you revisited your company’s retirement plan lately? Take a look at the many retirement savings options in order to make sure that you are taking advantage of tax deductions as well as providing opportunities for owners and employees to save for retirement.   

Year-end planning equals fewer surprises

There are many other opportunities to discuss as year-end approaches. And, many times, there may be strategies such as deferral of income, prepayment of expenses, etc., that can help you save taxes. We are here to help.

Please contact our office today at 303-900-7265, buben.jeanine@comcast.net, or on the Appointments page of our website at https://www.remotebusinesssolutionsinc.org/appointments.php to set up your year-end review and your income tax seaon interview (tax organizer). As always, planning ahead can help you minimize your tax bill and position you for greater success.

December 17, 2020 Westminster, CO based virtual business services provider Business Consulting & Taxation, Inc. | Tax Season 2021 Page | Remote Business Solutions, Inc.

Re: Year-end letter for individuals

As we wrap up 2020, year-end tax planning has never been more crucial. This year brought challenges and disruptions that significantly impacted your personal and financial situations – COVID-19, economic relief measures, new tax laws and political shifts. Now is the time to take a closer look at your current tax strategies to make sure they are still meeting your needs and take any last-minute steps that could save you money.

We’re here to help you take a fresh look at the health of your tax and financial well-being. Please contact us at your earliest convenience to discuss your tax situation so we can develop a customized plan. In the meantime, here’s a look at some issues to consider as we approach year-end.

Key tax considerations related to COVID-19

Many tax provisions were implemented under the Coronavirus Aid, Relief and Economic Security (CARES) Act aimed to help individuals and businesses deal with the COVID-19 pandemic and its ongoing economic disruption.

Economic impact payment (EIP)

Eligible individuals received a payment of $1,200 ($2,400 for joint filers) plus $500 for each qualifying child, with payments phased out based on adjusted gross income. The payments are treated as advance refunds of a 2020 tax credit. If you received an EIP, you should have received IRS Notice 1444, Your Economic Impact Payment. Keep this for record-keeping purposes.

Charitable deductions

Unique to 2020, individuals who do not itemize their deductions can take an above-the-line charitable deduction of up to $300. Such contributions must be made in cash and made to qualified organizations.

Retirement accounts

You can take up to $100,000 in coronavirus-related distributions from retirement plans through the end of the year without being subject to the 10% additional tax for early distributions. Additionally, required minimum distributions (RMDs) are temporarily suspended for 2020. If your retirement assets have taken a hit, not having to take an RMD may allow those assets to recover some value before you liquidate them.

State tax obligations related to teleworking arrangements for employees

As the COVID-19 outbreak continues, many employers are encouraging or requiring their employees to work from home (i.e., telework). Such remote working arrangements could potentially have tax implications that should be considered.

Fraudulent activity remains a significant threat

Our firm takes security seriously and we think you should as well. Fraudsters continue to refine their techniques and tax identity theft remains a significant concern. Beware if you:  

  • Receive a notice or letter from the Internal Revenue Service (IRS) regarding a tax return, tax bill or income that doesn’t apply to you
  • Get an unsolicited email or another form of communication asking for your bank account number or other financial details or personal information
  • Receive a robocall insisting you must call back and settle your tax bill

Make sure you’re taking steps to keep your personal financial information safe. Let us know if you have questions or concerns about how to go about this.  

The Affordable Care Act (ACA) and your taxes

The U.S. Supreme Court is expected to rule on the constitutionality of the ACA in 2021. Though many questions remain, the penalty that the ACA imposes on individuals who do not have health insurance was repealed. However, other aspects of the ACA are still in place. Contact us if you have questions about how this affects you.

Importance of retirement planning

We recommend you review your retirement situation at least annually. That includes making the most of tax-advantaged retirement saving options, such as traditional IRAs, Roth IRAs and company retirement plans. It’s also advisable to take advantage of health savings accounts that can help you reduce your taxes and save for your future. We can help you determine whether you’re on target to reach your retirement goals.

Virtual currency/cryptocurrency

Virtual currency transactions are becoming more common. There are many different types of virtual currencies, such as Bitcoin, Ethereum and Ripple. The sale or exchange of virtual currencies, the use of such currencies to pay for goods or services or holding such currencies as an investment generally has tax consequences. We can help you understand those consequences.  

Year-end planning equals fewer surprises

There are many other opportunities to discuss as year-end approaches. And, many times, there may be strategies such as deferral of income, prepayment of expenses, etc., that can help you save taxes. We are here to help.

Whether it’s working toward retirement or getting answers to your tax and financial questions, we’re here for you. Please contact our office today at 303-900-7265, buben.jeanine@comcast.net, or on the Appointments page of our website at https://www.remotebusinesssolutionsinc.org/appointments.php to set up your year-end review and your income tax seaon interview (tax organizer). As always, planning ahead can help you minimize your tax bill and position you for greater success.

If you are a low income client or visitor looking for free or low-income tax services, please visit the Internal Revenue Service (IRS) website for their VITA Program locations, or the AARP website for their senior citizen tax service program sites.  You may be asked to submit proof of low income in order to use these services.  Per the Internal Revenue Service free tax services https://www.irs.gov/pub/irs-pdf/p3676bsp.pdf:

The VITA program offers free tax help to people who make $57,000 or less, persons with disabilities and limited English-speaking taxpayers.

The TCE program offers free tax help to those who are 60 years of age and older. TCE volunteers specialize in questions about pensions and retirement-related issues unique to seniors.

Per AARP: 

   AARP does offer free in-person tax help. Our Tax-Aide sites are open annually from late January/early February to April 15. To find a location near you or for the latest updates, go to aarpfoundation.org/taxhelp.

If you are preparing your own income tax returns or other types of tax returns, you may want to visit the Self-Prepared returns links in our RBSI Virtual Tax Center or the https://www.irs.gov and your state/local departments of revenue for forms and instructions.  Jeanine will not be assisting clients or non-clients with the use of free tax software or free tax preparation services.  Tax consulting must be pre-paid on an hourly basis.

Don't forget that your business or entity, and you as an owner or other individual, may be liable for other tax complaince (tax returns and tax payments) as well as the income taxes featured during income tax season (about January 28 through December 4 annually).  Our virtual tax center has services and information that will help our clients meet these obligations:

 

COVID Tax Tip 2020-159: Here’s what taxpayers can do now to Get Ready to file taxes in 2021

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IRS Tax Tips November 23, 2020

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Issue Number: COVID Tax Tip 2020-159


Here’s what taxpayers can do now to Get Ready to file taxes in 2021


There are steps people can take now to make sure their tax filing experience goes smoothly in 2021. First, they can visit the Get Ready page on IRS.gov.

Here are a few other things people can do now:

Check their withholding and make any adjustments soon
Since most taxpayers typically only have a few pay dates left this year, checking their withholding soon is especially important. It's even more important for those who:
  • Received a smaller refund than expected after filing their 2019 taxes this year.
  • Owed an unexpected tax bill last year.
  • Experienced personal or financial changes that might change their tax liability.

Some people may owe an unexpected tax bill when they file their 2020 tax return next year, if they didn’t have enough withheld throughout the year. To avoid this kind of surprise, taxpayers should use the Tax Withholding Estimator to perform a quick paycheck or pension income checkup. Doing so helps them decide if they need to adjust their withholding or make estimated or additional tax payments now.

Gather tax documents and keep them for at least three years
Everyone should come up with a recordkeeping system. Whether it's electronic or paper, they should use a system to keep all important information in one place. Having all needed documents on hand before they prepare their return helps them file a complete and accurate tax return. This includes:
  • Their 2019 tax return.
  • Form W-2 from employers.
  • Form 1099 from banks and other payers.
  • Forms 1095-A from the marketplace for those claiming the premium tax credit.
  • Form 1099-NEC, Nonemployee Compensation
  • Notice 1444, Your Economic Impact Payment.

Most income is taxable, including unemployment compensation, refund interest and income from the gig economy and virtual currencies. Therefore, taxpayers should also gather any documents from these types of earnings. People should keep copies of tax returns and all supporting documents for at least three years.

Confirm mailing and email addresses
To make sure forms make it to the taxpayer on time, people should confirm now that each employer, bank and other payer has the taxpayer's current mailing address or email address. Typically, forms start arriving by mail or are available online in January.

Remember these new things when preparing for the 2021 tax filing season
  • Taxpayers may be able to claim the recovery rebate credit if they met the eligibility requirements in 2020 and one of the following applies to them:

     - They didn't receive an Economic Impact Payment in 2020.
     - They are single and their payment was less than $1,200.
     - They are married, filed jointly for 2018 or 2019 and their payment was less than $2,400.
     - They didn’t receive $500 for each qualifying child.

  • Taxpayers who received a federal tax refund in 2020 may have been paid interest. The IRS sent interest payments to individual taxpayers who timely filed their 2019 federal income tax returns and received refunds. Most interest payments were received separately from tax refunds. Interest payments are taxable and must be reported on 2020 federal income tax returns. In January 2021, the IRS will send a Form 1099-INT, Interest Income to anyone who received interest totaling at least $10.


Share this tip on social media -- #IRSTaxTip: Here’s what taxpayers can do now to Get Ready to file taxes in 2021. https://go.usa.gov/x7puA

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https://www.irs.gov/individuals/steps-to-take-now-to-get-a-jump-on-next-years-taxes

Revenue Procedure 2020-51: This revenue procedure provides a safe harbor for certain Paycheck Protection Program loan participants, whose loan forgiveness has been partially or fully denied, or who decide to forego requesting loan forgiveness, to claim a deduction for certain otherwise deductible eligible payments on (1) the taxpayer’s timely filed, including extensions, original income tax return or information return, as applicable, for the 2020 taxable year, or (2) an amended return or an administrative adjustment request (AAR) under section 6227 of the Internal Revenue Code (Code) for the 2020 taxable year, as applicable.  For taxpayers that decide to forego requesting loan forgiveness, the safe also allows these taxpayer to claim a deduction for the otherwise deductible eligible payments on an original income tax return or information return, as applicable, for the taxable year in which the taxpayer decides to forego requesting forgiveness.

Revenue Ruling 2020-27: This revenue ruling provides guidance on whether a Paycheck Protection Program (PPP) loan participant that paid or incurred certain otherwise deductible expenses can deduct those expenses in the taxable year in which the expenses were paid or incurred if, at the end of such taxable year, the taxpayer reasonably expects to receive forgiveness of the covered loan.  The revenue ruling also provides guidance if, as of the end of the 2020 taxable year, the PPP loan participant has not applied for forgiveness, but intends to apply in the next taxable year.

Business Tax Provisions: The Year in Review (Source:  Newsletter, Dec. 2020)

Here's what business owners need to know about tax changes for 2020.

Standard Mileage Rates
The standard mileage rate in 2020 is 57.5 cents per business mile driven.

Health Care Tax Credit for Small Businesses
Small business employers who pay at least half the premiums for single health insurance coverage for their employees may be eligible for the Small Business Health Care Tax Credit as long as they employ fewer than the equivalent of 25 full-time workers and average annual wages do not exceed $50,000 (adjusted annually for inflation). This amount is $55,200 for 2020 returns.

In 2020 (as in 2014-2018), the tax credit is worth up to 50 percent of your contribution toward employees' premium costs (up to 35 percent for tax-exempt employers.

Section 179 Expensing and Depreciation
Under the Tax Cuts and Jobs Act of 2017, the Section 179 expense deduction increases to a maximum deduction of $1.04 million of the first $2.59 million of qualifying equipment placed in service during the current tax year. The deduction was indexed to inflation for tax years after 2018 and enhanced to include improvements to nonresidential qualified real property such as roofs, fire protection, and alarm systems and security systems, and heating, ventilation, and air-conditioning systems.

Businesses are allowed to immediately deduct 100% of the cost of eligible property placed in service after September 27, 2017, and before January 1, 2023, after which it will be phased downward over a four-year period: 80% in 2023, 60% in 2024, 40% in 2025, and 20% in 2026. The standard business depreciation amount is 27 cents per mile (up from 26 cents per mile in 2019).

Please call if you have any questions about Section 179 expensing and the bonus depreciation.

Work Opportunity Tax Credit (WOTC)
Extended through 2020 under the Further Consolidated Appropriations Act, 2020, the Work Opportunity Tax Credit can be used by employers who hire long-term unemployed individuals (unemployed for 27 weeks or more). It is generally equal to 40 percent of the first $6,000 of wages paid to a new hire. Please call if you have any questions about the Work Opportunity Tax Credit.

SIMPLE IRA Plan Contributions
Contribution limits for SIMPLE IRA plans increased to $13,500 for persons under age 50 and $16,500 for persons age 50 or older in 2020. The maximum compensation used to determine contributions is $285,000.

Please contact the office if you would like more information about these and other tax deductions and credits to which you are entitled.

Small Business: Deductions for Charitable Giving

Tax breaks for charitable giving aren't limited to individuals, your small business can benefit as well. If you own a small to medium-size business and are committed to giving back to the community through charitable giving, here's what you should know.

1. Verify that the Organization is a Qualified Charity

Once you've identified a charity, you'll need to make sure it is a qualified charitable organization under the IRS. Qualified organizations must meet specific requirements as well as IRS criteria and are often referred to as 501(c)(3) organizations. Note that not all tax-exempt organizations are 501(c)(3) status, however.

There are two ways to verify whether a charity is qualified:

  • Use the IRS online search tool; or
  • Ask the charity to send you a copy of their IRS determination letter confirming their exempt status.

2. Make Sure the Deduction is Eligible

Not all deductions are created equal. In order to take the deduction on a tax return, you need to make sure it qualifies. Charitable giving includes the following: cash donations, sponsorship of local charity events, in-kind contributions such as property such as inventory or equipment.

Lobbying. A 501(c)(3) organization may engage in some lobbying, but too much lobbying activity risks the loss of its tax-exempt status. As such, you cannot claim a charitable deduction (or business expense) for amounts paid to an organization if both of the following apply:

  • The organization conducts lobbying activities on matters of direct financial interest to your business.
  • A principal purpose of your contribution is to avoid the rules discussed earlier that prohibit a business deduction for lobbying expenses.

Further, if a tax-exempt organization, other than a section 501(c)(3) organization, provides you with a notice on the part of dues that is allocable to nondeductible lobbying and political expenses, you cannot deduct that part of the dues.

3. Understand the Limitations

Sole proprietors, partners in a partnership, or shareholders in an S-corporation may be able to deduct charitable contributions made by their business on Schedule A (Form 1040). Corporations (other than S-corporations) can deduct charitable contributions on their income tax returns, subject to limitations.

Cash payments to an organization, charitable or otherwise, may be deductible as business expenses if the payments are not charitable contributions or gifts and are directly related to your business. Likewise, if the payments are charitable contributions or gifts, you cannot deduct them as business expenses.

Sole Proprietorships. As a sole proprietor (or single-member LLC), you file your business taxes using Schedule C of individual tax form 1040. Your business does not make charitable contributions separately. Charitable contributions are deducted using Schedule A, and you must itemize in order to take the deductions.

Partnerships. Partnerships do not pay income taxes. Rather, the income and expenses (including deductions for charitable contributions) are passed on to the partners on each partner's individual Schedule K-1. If the partnership makes a charitable contribution, then each partner takes a percentage share of the deduction on his or her personal tax return. For example, if the partnership has four equal partners and donates a total of $2,000 to a qualified charitable organization in 2020, each partner can claim a $500 charitable deduction on their 2020 tax return.

A donation of cash or property reduces the value of the partnership. For example, if a partnership donates office equipment to a qualified charity, the office equipment is no longer owned by the partnership, and the total value of the partnership is reduced. Therefore, each partner's share of the total value of the partnership is reduced accordingly.

S-Corporations. S-Corporations are similar to Partnerships, with each shareholder receiving a Schedule K-1 showing the amount of charitable contribution.

C-Corporations. Unlike sole proprietors, partnerships, and S-corporations, C-Corporations are separate entities from their owners. As such, a corporation can make charitable contributions and take deductions for those contributions.

4. Categorize Donations

Each category of donation has its own criteria with regard to whether it's deductible and to what extent. For example, mileage and travel expenses related to services performed for the charitable organization are deductible but the time spent on volunteering your services is not.

Here's another example: As a board member, your duties may include hosting fundraising events. While the time you spend as a board member is not deductible, expenses related to hosting the fundraiser such as stationery for invitations and telephone costs related to the event are deductible.

Generally, you can deduct up to 50 percent of adjusted gross income. Non-cash donations of more than $500 require completion of Form 8283, which is attached to your tax return. In addition, contributions are only deductible in the tax year in which they're made.

5. Keep Good Records

The types of records you must keep vary according to the type of donation (cash, non-cash, out of pocket expenses when donating your services) and the importance of keeping good records cannot be overstated.

Ask for - and make sure you receive - a letter from any organizations stating that said organization received a contribution from your business. You should also keep canceled checks, bank and credit card statements, and payroll deduction records as proof or your donation. Furthermore, the IRS requires proof of payment and an acknowledgment letter for donations of $250 or more.

Questions about charitable donations? Help is just a phone call away.

Individual Taxpayers: Recap for 2020

(Source:  Newsletter, Dec. 2020)

As we close out the year and get ready for tax season, here's what individuals and families need to know about tax provisions for 2020.

Personal Exemptions
Personal exemptions are eliminated for tax years 2018 through 2025.

Standard Deductions
The standard deduction for married couples filing a joint return in 2020 is $24,800. For singles and married individuals filing separately, it is $12,400, and for heads of household, the deduction is $18,650.

The additional standard deduction for blind people and senior citizens in 2020 is $1,300 for married individuals and $1,650 for singles and heads of household.

Income Tax Rates
In 2020 the top tax rate of 37 percent affects individuals whose income exceeds $523,600 ($628,300 for married taxpayers filing a joint return). Marginal tax rates for 2020 are as follows: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. As a reminder, while the tax rate structure remained similar to prior years under tax reform (i.e., with seven tax brackets), the tax-bracket thresholds increased significantly for each filing status.

Estate and Gift Taxes
In 2020 there is an exemption of $11.58 million per individual for estate, gift, and generation-skipping taxes, with a top tax rate of 40 percent. The annual exclusion for gifts is $15,000.

Alternative Minimum Tax (AMT)
For 2020, exemption amounts increased to $72,900 for single and head of household filers, $113,400 for married people filing jointly and for qualifying widows or widowers, and $56,700 for married taxpayers filing separately.

Pease and PEP (Personal Exemption Phaseout)
Both Pease (limitations on itemized deductions) and PEP (personal exemption phase-out) have been eliminated under TCJA.

Flexible Spending Account (FSA)
A Flexible Spending Account (FSA) is limited to $2,750 per year in 2020 (up from $2,700 in 2019) and applies only to salary reduction contributions under a health FSA. The term "taxable year" as it applies to FSAs refers to the plan year of the cafeteria plan, which is typically the period during which salary reduction elections are made.

Long-Term Capital Gains
In 2020 tax rates on capital gains and dividends remain the same as 2019 rates (0%, 15%, and a top rate of 20%); however, taxpayers should be reminded that threshold amounts don't correspond to the tax bracket rate structure as they have in the past. For example, taxpayers whose income is below $40,000 for single filers and $80,000 for married filing jointly pay 0% capital gains tax. For individuals whose income is at or above $441,450 ($496,600 married filing jointly), the rate for both capital gains and dividends is capped at 20 percent.

Miscellaneous Deductions
Miscellaneous deductions that exceed 2 percent of AGI (adjusted gross income) are eliminated for tax years 2018 through 2025. As such, you can no longer deduct on Schedule A expenses related to tax preparation, moving (except for members of the Armed Forces on active duty who move because of a military order), job hunting, or unreimbursed employee expenses such as tools, supplies, required uniforms, travel, and mileage.

Business owners are not affected and can still deduct business-related expenses on Schedule C.

Individuals - Tax Credits (Source:  Newsletter, Dec. 2020)

Adoption Credit
In 2020 a nonrefundable (i.e., only those with tax liability will benefit) credit of up to $14,300 is available for qualified adoption expenses for each eligible child.

Child and Dependent Care Credit
The Child and Dependent Care Tax Credit was permanently extended for taxable years starting in 2013 and remained under tax reform. As such, if you pay someone to take care of your dependent (defined as being under the age of 13 at the end of the tax year or incapable of self-care) in order to work or look for work, you may qualify for a credit of up to $1,050 or 35 percent of $3,000 of eligible expenses.

For two or more qualifying dependents, you can claim up to 35 percent of $6,000 (or $2,100) of eligible expenses. For higher-income earners, the credit percentage is reduced, but not below 20 percent, regardless of the amount of adjusted gross income.

Child Tax Credit and Credit for Other Dependents
For tax years 2018 through 2025, the Child Tax Credit increases to $2,000 per child. The refundable portion of the credit increases from $1,000 to $1,400 - 15 percent of earned income above $2,500, up to a maximum of $1,400 - so that even if taxpayers do not owe any tax, they can still claim the credit. Please note, however, that the refundable portion of the credit (also known as the additional child tax credit) applies higher-income when the taxpayer isn't able to fully use the $2,000 nonrefundable credit to offset their tax liability.

Under TCJA, a new tax credit - Credit for Other Dependents - is also available for dependents who do not qualify for the Child Tax Credit. The $500 credit is nonrefundable and covers children older than age 17 as well as parents or other qualifying relatives supported by a taxpayer.

Earned Income Tax Credit (EITC)
For tax year 2020, the maximum earned income tax credit (EITC) for low and moderate-income workers and working families increased to $6,660 (up from $6,557 in 2019). The maximum income limit for the EITC increased to $56,844 (up from $55,952 in 2019) for married filing jointly. The credit varies by family size, filing status, and other factors, with the maximum credit going to joint filers with three or more qualifying children.

Individuals - Education Expenses (Source:  Newsletter, Dec. 2020)

Coverdell Education Savings Account
You can contribute up to $2,000 a year to Coverdell savings accounts in 2020. These accounts can be used to offset the cost of elementary and secondary education, as well as post-secondary education.

American Opportunity Tax Credit
For 2020, the maximum American Opportunity Tax Credit that can be used to offset certain higher education expenses is $2,500 per student, although it is phased out beginning at $160,000 adjusted gross income for joint filers and $80,000 for other filers.

Lifetime Learning Credit
A credit of up to $2,000 is available for an unlimited number of years for certain costs of post-secondary or graduate courses or courses to acquire or improve your job skills. For 2020, the modified adjusted gross income (MAGI) threshold at which the Lifetime Learning Credit begins to phase out is $114,000 for joint filers and $57,000 for singles and heads of household. The credit cannot be claimed if your MAGI is $67,000 or more ($134,000 for joint returns)

Employer-Provided Educational Assistance
As an employee in 2020, you can exclude up to $5,250 of qualifying postsecondary and graduate education expenses that are reimbursed by your employer.

Student Loan Interest
In 2020, you can deduct up to $2,500 in student-loan interest as long as your modified adjusted gross income is less than $65,000 (single) or $135,000 (married filing jointly). The deduction is phased out at higher income levels.

Individuals - Retirement (Source:  Newsletter, Dec. 2020)

Contribution Limits
For 2020, the elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is $19,500 ($19,000 in 2019). For persons age 50 or older in 2020, the limit is $26,000 ($6,500 catch-up contribution).

Retirement Savings Contributions Credit (Saver's Credit)
In 2020, the adjusted gross income limit for the saver's credit for low and moderate-income workers is $65,000 for married couples filing jointly, $48,750 for heads of household, and $32,500 for married individuals filing separately and for singles. The maximum credit amount is $2,000 ($4,000 if married filing jointly). As a reminder, starting in 2018, the Saver's Credit can be taken for your contributions to an ABLE (Achieving a Better Life Experience) account if you're the designated beneficiary. However, keep in mind that your eligible contributions may be reduced by any recent distributions you received from your ABLE account.

If you have any questions about these and other tax provisions that could affect your tax situation, don't hesitate to call.

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