|
Dear Friends and Valued Clients:
Let me start by Hoping that everyone is safe! It has been an upside-down year. In sports, congratulations to the City of Los Angeles as their Dodgers and Lakers were world champions in their respective sports. We have a new President-Elect taking over January 20, 2021 so expect changes not only to the tax code but to many other areas as well. The Pandemic is still with us so PLEASE stay safe, wear your masks, stay socially distant. See page 2 for how we will be handling tax preparation this year. Let’s talk taxes: HEALTH INSURANCE: For 2020, we have MAJOR CHANGES in health insurance for those living in California. For federal purposes, the penalty for NOT having health insurance has been eliminated; however, some of you may still be eligible for the FEDERAL subsidy. If you are, you must note that if your income exceeds 400% of the poverty line, you must repay the subsidy in full. Beginning in 2020, Californians are now REQUIRED to have health insurance. There is a $ 750 penalty if you do not have coverage. CA also has created a subsidy program with individual income at or below 600% of the poverty line. You will receive Form 3895 which I will need to prepare Form 3849. This form reconciles if you need to pay back a part of the subsidy or not. STANDARD DEDUCTION: $12,400 (Single); $24,800 (MFJ); $18,650 (HH) CHILD TAX CREDIT: Children MUST have a Social Security number to be eligible Mileage reimbursement for 2020: 57.5 cents. Charity: 14 cents; medical: 17 cents. VIRTUAL CURRENCY: A truly big item these days. The question asking if you sold, sent or exchanged virtual currency has made its way to the front page of the Form 1040 right under the address section. Obviously, IRS is looking a this carefully. Organizers or checklist: If you would like an organizer showing the previous year’s items, please call me and I will send you one. If you prefer a checklist, please go to www.censoprano.com. There you can find a generic organizer and the checklists. Dateline: S Corporations are due March 15, C Corporations are due April 15; Partnerships are due March 15. E-filing: Please let me know if you DO NOT want me to e-file your return. All states are requiring e-filing unless you have reasonable cause. Late filing penalties: Please note that filing an extension is an extension of time to FILE your tax return; it is not an extension of time to PAY your taxes due. So if you owe money and file AFTER April 15, IRS will charge a penalty which is .5% of the tax due plus 6% interest. This is calculated on a monthly basis. You can only avoid the penalty if you pay your tax IN FULL by the due date. Sometimes that is not possible because you have not received certain information such as a K1 schedule. IRS is mandating that if you file your return after April 15 and have a balance due, the penalty and interest will be reflected on the bottom of the tax return. EXTENSIONS: I must have an email or phone call verification from you asking for an extension. This is due to the problems concerning identity theft. Please make sure you let us know you want an extension otherwise it will not be filed. 1099’s and penalties: You MUST issue 1099’s by January 31. If you file these later, the penalty is $260 per return not filed. Note that independent contractors now receive FORM 1099-NEC, not 1099-MISC. PROCEDURE: IF you are sending me your papers by email, please ask me for my portal “VERIFYLE” I will send it to you and your information will be protected. The old email address is being shut down SOLAR: if the solar was placed in service ion 2020, the credit is 26%; 2021 22 RETIREMENT: Maximum IRA $6000 (you might not qualify);there is a $ 1000 catch-up. Maximum SEP: $57,000 based on a formula;401k maximum $19,500 under age 50; $26,000 50 and older. Starting in 2020, you can contribute to an IRA if you are working at ANY AGE! This is a good thing! In addition to the above, If you took a COVID RELATED distribution in 2020, you can opt to pay the tax on the distribution over a three year period. So if you took $ 90,000 you would claim 30k in 2020, 30k in 21 and 30k in 22; and if you wanted to, you could repay the entire 90k before 2022 and not pay any tx as it would be considered an allowable rollover. THIS IS FANTASTIC! We use NEW FORM 8915-E Charitable Contributions: If you do not itemize you can take an above-the-line deduction for 2020 of $ 300. Donor advised fund does not qualify, carryovers do not qualify, must be a qualified organization. RECOVERY REBATE CREDIT: This deals with the STIMULUS Checks you may have received during 2020. We will need to reconcile this credit against the amount you received. Upon calculation if you did not receive enough stimulus, you will receive the difference here. If you received TOO MUCH stimulus, you DO NOT have to pay it back. If you missed the stimulus check, you may be able to get it during this filing. The IRS is to mail Notice 1444 called Your Economic Impact Payment to the last know address of the recipient. This shows the amount you may have received. I need this information to calculate the potential credit. Unemployment: Sorry to say ALL the unemployment (including the Federal piece) is taxable for Federal only 2021 TAX PREPARATION: IN LIGHT OF THE PANDEMIC, I WILL AGAIN NOT SIT WITH CLIENTS FOR THE FORSEEABLE FUTURE. PLEASE PROVIDE YOUR DOCUMENTS TO ME IN THE FOLLOWING MANNERS:
PLEASE BE SAFE; WEAR A MASK; WASH HANDS AND SOCIAL DISTANCE LIFE IS TOO PRECIOUS TO THROW IT ALL AWAY WARMEST REGARDS Sal Comments are closed.
|
Categories
All
AuthorSal Censoprano is a Certified Public Accountant (CPA) and tax practice owner for over 40 years. He was born and raised in Brooklyn, New York and earned his master’s degree in taxation. Archives
December 2020
|
RSS Feed