We hope you and your family are well! This past year brought challenges and disruptions that may have significantly impacted your personal and financial situations – COVID-19, economic relief measures, new tax laws and political shifts. We are here to help you take a fresh look at the health of your tax and accounting well-being. We look forward to discussing your tax situation so we can develop a customized plan. In the meantime, here is a look at some issues to consider for year-end tax preparation.
Key tax considerations related to COVID-19
Many tax provisions were implemented under the Coronavirus Aid, Relief and Economic Security (CARES) Act and the year-end coronavirus relief legislation, known as the Consolidated Appropriations Act, 2021 (H.R. 133), both were aimed to help individuals and businesses deal with the COVID-19 pandemic and its ongoing economic disruption.
Economic impact payments (EIP)
Eligible individuals received first round payments of $1,200 ($2,400 for joint filers) plus $500 for each qualifying child, with payments phased out based on adjusted gross income. A second round of payments were sent to eligible individuals at the end of the year, of $600 ($1,200 for joint filers) plus $600 for each qualifying child. 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. Keep this for record-keeping purposes.
Medical expense deduction
The threshold for taxpayers to qualify for the medical expense deduction was going to be 10% of adjusted gross income beginning in 2021 but, with the recent legislation, it now permanently
remains at 7.5%. Thus, making it easier for more taxpayers to take advantage of this tax deduction.
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.
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 does not 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 are taking steps to keep your personal financial information safe. Let us know if you have questions or concerns about how to go about 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.
Busy Season Updates
As previously noted, due to several factors, most notably the Covid-19 pandemic, we have transformed to an entirely contactless and virtual office. This was done for the benefit of both you, our valued clients, and our team. We have effectively utilized virtual tools, such as Zoom teleconferencing, our client-friendly 256-bit encrypted client portal, and our redesigned and informative website. Our commitment remains to provide the exceptional professional service you deserve. You can access the client portal via our website, www.tanfs.com, or clicking portal access. Our secured portal can be access on your computer, tablet or mobile device. Simply login in or utilize the guest exchange, take a picture of your tax documents, and upload… we will take care of the rest!
Whether it’s working toward retirement or getting answers to your tax and financial questions, we are here for you. Please contact our office today by email (info@tanfs.com) or call 980.434.2044 if you would like to set up a year-end consultation. We look forward to connecting with you soon!