What's New for 2020
The filing season opens February 12th, 2021. If you receive your documents and wish to upload them or drop them off, you may do so. The IRS deadline is April 15, 2021. We recommend you upload your documents here or drop your documents off as early as possible to avoid extensions. Although extensions sometimes may be necessary, the IRS and will still impose late payment penalties for those that have a tax liability after April 15, 2021.
Economic Income Payment (Stimulus 1st payment):
In the summer of 2020, the CARES Act allowed for a Recovery Rebate Credit to certain taxpayers in the United States. Whether you received this by check or direct deposit, we will need to know the exact amount of the stimulus you received. If you did not receive a stimulus check this summer, you may still be entitled to claim the credit on your 2020 return. Approximately 15 days after you received the stimulus payment, the IRS sent a follow-up letter notifying you that it had been deposited or mailed. Please provide this letter when you send in your documents as we must report this on your tax return. If you do not have the letter, we will need the EXACT dollar amount you received by check or deposit to enter on your return. Any discrepancies may cause a delay in your refund. Please note: the payment you received is not taxable but must still be reported on your return.
Previously, charitable contributions could only be deducted if taxpayers itemized their deductions.
For 2020, taxpayers who do NOT itemize deductions may take a charitable deduction of up to $300 for cash contributions made to qualifying organizations.
If you DO itemize, you may deduct all charitable donations (cash or non-cash) as usual. For the purposes of this deduction, qualifying organizations are those that are religious, charitable, educational, scientific or literary in purpose. You must have a dated receipt from the organization.
The standard deduction for 2020 is $12,400 (Single), $24,800 (Married Filing Joint), and $18,650 (Head of Household). You may still itemize your deductions if they are higher than the standard deduction although there are still some limits on itemized deductions this year.
State, Local and Property Taxes:
If you itemize, the limit on deducting the aggregate total of state, local AND property taxes is limited to $10,000 annually. Any amounts over this is not deductible.
HELOC and 2nd Mortgage Interest:
Originally repealed for 2018, Congress has modified the deduction for mortgage interest on home equity lines and 2nd mortgages. If the funds were used to buy, build or substantially improve your primary or second home, you may be able to deduct it. We will need to know when and for what purpose the funds were used in order to determine the deductibility of this interest.
Unreimbursed Employee Business Expenses:
If you are a W-2 employee and deduct unreimbursed business expenses (mileage, per diems, tools, union dues, uniforms, etc.), this deduction is no longer available. If you incur a lot of these expenses, you need to discuss the use of an accountable plan with your employer to be reimbursed directly for these types of expenses.
529 Savings Plans:
Ohio allows for a state tax deduction for contributions made to a 529 Savings Plan of $4,000 per beneficiary. This is a great savings option for parents, grandparents and family to save for a child’s future education needs tax free. Also, withdrawals may now be used for private and religious elementary and secondary education for tuition and materials (up to $10,000 per student per year).
For tax year 2020, if you have health insurance through the Marketplace, you are required to report this on your tax return. We will require form 1095-A from the Marketplace to prepare your taxes.
Children/Student Tax Returns:
We strongly encourage that you do not allow your dependent children or college students to file their own returns this year. Allowing a child to file their own return, particularly a student, can cost the child and parent literally thousands of dollars in Education credits. This is extremely important if you have a child in college.
Traditional/Roth IRA Contributions:
You have until April 15, 2021 to contribute to your Traditional or Roth IRA accounts and have it apply to your 2020 tax return. The IRA contribution limits for 2020 are $6,000 ($7,000 if age 50 or older). These limits apply to Traditional and Roth IRAs. Please call us for an appointment to discuss your individual limits for contributing and how they will affect your tax return.