2020 is already almost done and tax season is fast approaching! We wanted to take time to write this article to remind you of some of the changes from the past year, as well as some things you should do to prepare for the tax season.
Economic Impact Payments (Stimulus checks)- Most eligible individuals received a stimulus check this year. We will need to know how much you received as this tax credit will be reconciled on your 2020 tax return. You should have received Notice 1444 in the mail with the total amount received. If you lost this paperwork, please verify with your bank account to determine the total amount received. This amount should be included with your 2020 tax return documents.
Unemployment- Many people have lost jobs or been temporarily laid off, which has resulted in a surge of individuals receiving unemployment benefits. Unemployment is taxable, and these benefits will affect your tax return. If you are receiving unemployment and haven't been withholding anything, or not enough, be prepared to pay the taxes due in April, 2021.
Deductions- As always, please note the total amounts for your medical expenses, property taxes, mortgage interest, charity, and any other deductions you may have. There is a new deduction for charity amounts up to $300 that does not require you to itemize, so please make sure to find and include all your cash contributions from 2020.
Though employee work related business expenses are no longer deductible on your Federal return, we will still need the information for your state return. With so many people working from home, you should check with your employer to see if they have an accountable plan to reimburse you, tax free, for the business use of your home.
PPP Loans- PKC has been staying up to date with the latest guidelines as available on these loans and the forgiveness through the SBA. Unfortunately for many businesses, the process has been confusing and difficult to navigate.
If you own a business with employees and received a PPP loan, please contact our office as soon as possible. There are 2020 tax implications that you should be aware of for your business tax return. If you are self-employed and received a PPP loan, we are still waiting on further IRS guidance on how to treat the PPP loan related expenses on the 2020 tax return. As soon as that information is available, we will pass on to our clients. If you are unsure how the PPP loan forgiveness amount could impact your tax return, please contact our office to discuss.
Compliance- We will need you to verify if you've bought, sold, or traded any virtual currency to avoid IRS penalties.
We also, as always, are required to obtain any and all official IRS documents including (but not limited to): all W2's, 1099's (dividends, interest, retirement, and brokers), 1095's (health insurance), 1098, etc.
Other Changes- Think through the last year and any big changes that may have happened. 2020 was a crazy start to the decade, and we know it's likely this year looked very different than past years. If you've had any major changes, whether mentioned earlier or not, you should contact us to see if anything needs to be changed. Once the year is over, you can no longer make changes that could make a huge difference in your return.
Also keep in mind things like address changes, phone or email changes, as well as bank account changes, as we will need to know these things. We are still offering tax planning appointments through the end of the year, so please don't hesitate to reach out if you feel you may need to make some changes.