Tri-County Area Chamber Of Commerce: Key Tax Law Changes For Tax Year 2020

Pottstown PA

19 November, 2020

1:35 PM

Description

Press release from TriCounty Area Chamber of Commerce: November 17, 2020 Below are important tax updates for 2020 provided by Akins Accounting. 2020 has been full of surprises - prepare for 2020 taxes to avoid even more surprises! Economic Impact Payment (EIP) Taxpayers who didn't get some or all of the EIP they were entitled to will be able to claim the difference as a Recovery Rebate Credit on their 2020 tax return. According to the IRS, there is no provision in the law that would require individuals who qualify for a Payment based on their 2018 or 2019 tax returns, to pay back all or part of the payment, if based on the information reported on their 2020 tax returns, they no longer qualify for that amount or would qualify for a lesser amount. The $500 that you received for each Qualifying Child is NOT includable in Gross Income, and will NOT reduce a refund or increase the amount owed. Paycheck Protection Program Loans (PPP) For tax purposes, loan forgiveness amounts are EXCLUDED from Gross Income, but forgiven Expenses are NOT DEDUCTIBLE (IRS Notice 2020-32). https://www.irs.gov/pub/irs-drop/n-20-32.pdf Forms 1099-MISC and NEW 1099-NEC (Nonemployee Compensation) Both Forms 1099-MISC & 1099-NEC must be furnished to the recipient by Feb. 1. Payments of more than $600 in nonemployee compensation, including independent contractors, attorneys, and golden parachute payments, will be reported on Form 1099-NEC, box 1. Charitable Contributions A $300 above-the-line Charitable Contribution deduction is now available for Taxpayers who don't Itemize Deductions. The 60% Adjusted Gross Income (AGI) limit on cash contributions by individuals is disregarded. Required Minimum Distribution age raised from 70 ½ to 72 Under the SECURE Act and for distributions required to be made after Dec. 31, 2019, the age at which individuals must start taking distributions from these retirement plans has been increased from 70½ to 72. Under the CARES Act, RMDs are not required for 2020. Retirement Plan Distributions Under the CARES Act and for 2020 distributions from IRAs and workplace retirement plans, if the taxpayer is impacted by COVID-19, they can take a distribution up to $100,000 and not be subjected to the 10% early withdrawal penalty. The distribution can be included in income ratably over a 3-year period unless the taxpayer elects otherwise. The taxpayer can also contribute the money back to their retirement plan within three years and treat the transaction as a direct rollover. Repeal of maximum age for Traditional IRA contributions Individuals of ANY AGE can make contributions to a traditional IRA, assuming there is enough compensation. Prior to this rule change, taxpayers were not allowed to make an IRA contribution once they reached age 70½ by the close of the year. The rationale for the rule change is that Americans are living longer, and many are continuing to work past 70½ years old. The restriction didn't apply to Roth IRA contributions. Penalty-Free Retirement Plan Withdrawals for BIRTHS & ADOPTIONS Taxpayers can take up to $5,000 (for each spouse) of penalty-free retirement plan distributions for expenses related to the birth or adoption of a child. EXTENDER PROVISIONS --- Please Check your 2018 & 2019 Tax Returns to see if any of these apply – Contact us to AMEND your return if they do! Exclusion from Gross Income for Discharge of Debt income from Qualified Principal Residence Debt (expired after 2017, retroactively extended through 2020). Deduction for Mortgage Insurance Premiums (expired after 2017, retroactively extended through 2020). Tuition and Fees Deduction for Higher Education (expired after 2017, retroactively extended through 2020). Nonbusiness Energy Property Credit (expired after 2017, retroactively extended through 2020). Medical Expense Deduction subject to 7.5% adjusted gross income threshold, instead of 10% (expired after 2018, extended for 2019 & 2020). Check out their blog on their website: www.AkinsAccounting.com for the most up-to-date Tax Law Changes. You can also follow them on Facebook for timely notifications affecting their taxes. This press release was produced by TriCounty Area Chamber of Commerce. The views expressed here are the author's own.