NEWS LETTER December 15, 2020 by AUSTIN TAX SERVICES INC., 910 Portland Ave, Gladstone, OR 97027 Office Phone 503 657-0039; Fax 503 650-8888; Website www.AustinTaxServicesInc.com
2020 will have to go down in history as a year of extreme societal challenges, so widespread and on so many fronts. And governmental efforts to mitigate the damage have resulted in multiple new enactments in the tax laws that continually evolved as the year wore on. As the end of the year approaches, lawmakers in Oregon and other states are debating whether or not to follow the federal lead on a number of them as they grapple with the anticipated disruptions to their budgets. All this means there will be significant impacts to next year’s tax filing season. Notable among them:
A one-time above-the-line charitable deduction of up to $300 for cash donations made by 12/31/2020 to qualified charities. This is per tax return, and is in addition to taking the standard deduction, so no need to itemize on a federal return to claim this. Keep in mind, donations paid directly to individuals and to funds to aid specific individuals (like Go Fund Me) do not qualify – they are non-deductible gifts. Neither do contributions to donor funds.
Economic Impact Payments – federal assistance checks, debit cards or direct deposits of up to $1200 each were issued to millions of people. This was a non-taxable advance payment of a credit which must be reconciled on your 2020 tax return, so we will need a copy of the notice IRS sent you that states the exact amount you received. If you did not get a payment and were eligible, be sure to let us know so it can be requested on your 2020 tax return.
Many collected unemployment benefits due to reduced work hours and layoffs. Even self-employed individuals could qualify for benefits for the first time ever. Remember, this is taxable income. If no federal or state tax was withheld, and you want to minimize a big tax bill with potential underpayment penalties when you file your tax return, boost tax withholdings on this year’s remaining income if you can, or make 4th quarter estimated payments by January 15, 2021.
IRS temporarily suspended the RMD (required minimum distribution) for 2020, so there will be no penalty if you did not take one from your IRA or employer’s retirement plan this year. IRA Contribution Limits for 2020 remain at $6000 ($7000 for those age 50 or over as of 12/31/20); any contributions must be made by April 15, 2021.
There were also special provisions to aid struggling businesses, such as loans to help retain employees and pay certain expenses, but with a litany of special rules and requirements that must be strictly adhered to in order to qualify for potential loan forgiveness, among other benefits. These will also need to be sorted out on future tax return filings.
Routine Reminders: Foreign Accounts – IRS is looking closely for offshore accounts. If you have a bank account, retirement account or business interest or ownership worth over $10,000 in a foreign country, be sure to let us know, as some special rules apply to you. There are substantial penalties for failure to disclose this information.
Any time you decide to transfer your investments to another brokerage or financial advisor, make sure your cost basis information is also transferred to the new company. This will be needed for your tax return each time you sell assets.
Standard Mileage Rates for 2020: Business, Farms & Rentals 57.5 cents/mi; Medical & Moving 17.0 cents/mi; Charitable 14.0 cents/mi. Be sure to keep a mileage log and record beginning and ending odometer readings for each deductible trip as you drive during the year. Also record beginning of year and end of year odometer readings on each vehicle you own because this deduction requires total yearly miles driven for calculating percentage of business use.
Oregon medical subtraction rules now apply to taxpayers age 66 and over by year-end. We will need all medical expenses, including mileage, to be separated out for each person in your household so we can calculate the correct amount to use.
Your safety is our concern and coronavirus restrictions have temporarily imposed changes to the way we do business. Rather than having our office open for walk-in visitors as in the past, we have rearranged our former reception area to serve as our new client interview space. We will meet with only one client or couple at a time by pre-scheduled appointment. Or if you prefer a contactless method, you may simply drop off your information in our mail slot – be sure to include your contact information – so we can call you later on for a phone interview. As always, we are grateful for your trust and for the continued opportunity to help you with your tax needs all year long.
OUR BEST WISHES FOR A SAFE AND SUCCESSFUL NEW YEAR!