Fleming Financial Services

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2020 Tax Law Notes


Filing Date StartupFriday, February 12. 2021


Filing Deadlines

January 31, 2021 – all W-2s and 1099s must be distributed

March 15, 2021 – Calendar Year Business Tax Returns due

April 15, 2021 – Personal Tax Returns due

October 15, 2021 – Extended Personal Tax Returns due


Tax Law Changes for 2020

There is no longer an age limit to contribute to a Traditional IRA, so if you are over 70 ½ and you or your spouse have earned income, you can get a tax deduction


The age to begin Required Minimum Distributions has been increased to age 72.  This is effective for all Taxpayers who did not reach 70 ½ by December 31, 2019


If you took a premature distribution from a retirement plan or IRA and it was Coronavirus related, you will not have to pay the usual 10% early withdrawal penalty


The Stimulus Payments will be accounted for on your tax return.  If you did not receive the amount you should have, you will receive a credit on your tax return


You will be able to deduct up to $300 for a cash or check donation to a qualified charity if you do not itemize your deductions


Unemployment Benefits

Many of you received Unemployment Benefits in 2020, these benefits are taxable at both the Federal and State levels.  Please make sure and include your 1099-G with your tax documents.


Changes in the Tax Rate Schedule

The Tax Rate Schedule has been adjusted for inflation


Exemptions are no longer allowed


Additional Due Diligence for Tax Credits for Children and Other Dependents

The IRS continues to require Tax Preparers to check to ensure that credits for Child Tax Credit, Additional Child Tax Credit, Credit for Other Dependents Earned Income Credit, American Opportunity Tax Credit (college tuition credit) and Head of Household Filing Status are legitimate.


What you need to bring with you is proof that the children are your dependents and living with you. A Tax Preparer is subject to hefty fines without that documentation.


The IRS has started to audit tax returns to ensure the amounts that the colleges are putting on the Form 1098-T, is what the Taxpayer actually paid during that year.  If you are able to claim these types of Tax Credits, whether for Taxpayer or their children, please bring with you proof of payment for tuition, books and any other college costs.


This payment information may be available on the college website.  That payment information and Form 1098-T from the school are both needed to get the credit.


Another reminder, if your child for whom you are taking College Education Credits also worked during 2020, and they file their taxes before you do, please make sure that they do not claim themselves as a dependent on their Tax Return.


Affordable Health Care Act

For 2020 there is no longer a penalty for not having Health Care coverage.  The IRS still requires Tax Preparers to ask if you have health care.


If the Taxpayer received Premium Tax Credit, the Taxpayer need to bring your 1095-A to make sure that is calculated properly.


Identity Theft

This continues to be a major problem and IRS suggests:


If you think you are a victim of Identity Theft, report it at www.identitytheft.gov which is a Federal Trade Commission website, and contact your Tax Preparer.


If you become a victim of Identity Theft, contact one of the major credit bureaus and put a “fraud alert” on your credit account. 


Respond immediately to any IRS Notice


Complete IRS Form 14039, Identity Theft Affidavit


File your tax return by paper and pay any taxes due


And remember,The IRS does not call you unless they have sent you a Notice in the mail


The IRS does not initiate contact with taxpayers by email to request personal or financial information (this includes any type of electronic communication, such as text messages and social media channels


Don’t give personal information over the phone, through the mail or the Internet unless you have either initiated the contact or are sure you know who is asking


Medical Expense Deduction

If you can itemize deductions, the Medical Expense Deduction has changed to 7.5 % of your Adjusted Gross Income for Taxpayers in 2020.


Charitable Giving with your IRA Distributions

Individuals age 70 ½ or older can continue to be able to exclude from gross income their Required Minimum Distributions up to $100,000 of Qualified Charitable Distributions.  This law is now permanent.


State of Michigan Changes

There has not been any changes for the State of Michigan.


First Time Homebuyers Pay Back Continues

If you took advantage of the First Time Homebuyers credit in 2008, you have to continue the fifteen year pay back in 2020.  Those that fall into this category had to purchase their homes during 2008.


Mileage Rates

The standard mileage rates for 2020 were:


Business – 57.5 cents per mile

Medical and Move Related – 17.0 cents per mile

Charitable – 14.0 cents per mile


Property Taxes Paid on your Home

The property taxes paid on your home in 2020 are deductible in most cases if you are able to itemize your deductions.  There are different calculations dependent upon whether you are filing Federal or State Tax Returns:


Federal

If you itemize your deductions, the full amount paid in 2020 is deductible


State

May be eligible for Homestead Property Taxes for the amount assessed (whether paid or not) in 2020


Charitable Giving

If you are not able to itemize your deductions, you are still eligible to receive a $300 charitable giving deduction.  You must provide proof of the cash or check donations. 

If you are able to itemize your deductions, please provide me with the following documentation:


Cash or Check – statement from Charity showing any gift over $250

Other Giving, in addition to a receipt from the organization, include the following:

listing of what was given and/or pictures of what you gave

the condition of given items

value of the given items


Foreign Financial Accounts Reporting

Anyone with foreign financial accounts or foreign trusts that exceed $10,000 in value is required to complete the IRS form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts).  There are major penalties for not filing this form.