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. Save 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.
Paycheck Protection Program
Paycheck Protection Program (PPP) loans have created their own unique tax issues created when the IRS and Treasury chose not to follow the intent of Congress. The Cares Act made it clear that the intent was for those funds to be fully non-taxable to the business receiving the relief. But the IRS and Treasury Secretary used another section of the Internal Revenue Code to circumvent the intent of Congress by making the expenses paid with PPP funds non-deductible. The bottom line is that you need to consider this extra income in your planning.
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 navigate this.
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. Please call us at 831-758-5966 to set up your year-end review. Planning ahead can help you minimize your tax bill and position you for greater success.
Our Holiday Schedule
We hope you and your family have an enjoyable and safe holiday season. Our office schedule during the season will be as follows.
We will be closed November 26 and 27 for the Thanksgiving holiday.
We will be closed from Noon on December 23 reopening Monday, December 28 for the Christmas holiday.
We will be closed December 31 and January 1 for the New Year holiday.
COVID-19 Office Procedures
Keeping you and our team safe during the pandemic is our first priority. Our office is following the appropriate safety protocols, both physical and procedural, to keep everyone sage and healthy. Here is our following process for working with you.
When practical we encourage team members to work remotely. When working within our office, we will maintain social distancing and mask protocols.
Except for limited attendance based on a specific unusual need-based basis, we will not be holding client meetings in our office and not allowing team members to visit client offices. Our physical office will be available for pick-up or drop-off of documents or information that cannot be readily shared electronically.
Should a physical in-office meeting be unavoidable we will limit attendance to a total of 4 persons in attendance, including our team. Also, all attendees will have their temperatures scanned prior to attendance. Anyone having a fever of any significance will be asked to leave the premises for everyone’s safety.
All client meetings will be done via telephone or video conference using our already existing technologies. We have staff that are specifically trained to assist you in using these if you are not already familiar with them.
For anyone with an already-scheduled appointment one of our team members will be contacting you to confirm the time and the appointment will be handled via telephone.