As we approach the end of a year that most of us are anxious to put behind us, We wish you and your loved ones a happy holiday season and a healthy & prosperous new year. We are writing earlier than usual because the Coronavirus Aid, Relief & Economic Security [CARES] Act, contained provisions that might affect your year-end tax planning.
1. You can deduct up to $300 in charitable contributions from your taxable income, even if you take the standard deduction. It is $300 per tax return, so married, filing jointly taxpayers are limited to a single $300 deduction. You still need a written receipt for any donation of $250 or more.
2. There is no required minimum distribution from traditional IRAs this year. You may still want to take out some funds to reduce tax on the back end. However, taxation of inherited IRAs is much more favorable under the new rules. Remember that you can contribute funds directly from your traditional IRA directly to a charity as a way to get funds out of your IRA without paying tax on it or having it increase the amount of social security subject to tax. Donating grain to a charity is another way to reduce income tax liability.
3. The Economic Impact Payments ($1200/adult taxpayer $500/dependent minor) are not subject to income tax & if you did not receive yours, you can apply for it on your 2020 tax return. If you received a $500 dependent minor payment to which you were not entitled, you may keep it. If you received a $1200 payment for a spouse who died prior to 2020, you must return it.
4. All taxpayers must answer the question about whether they did any virtual currency (BitCoin, Ethereum, etc.) transactions in 2020.
5. There is now a tax credit for sick leave and family leave taken by certain self-employed taxpayers.
Please continue to be alert to tax scams. Do not respond to any phone calls or e-mails purporting to be from the IRS, Social Security, or the Iowa Dept. of Revenue – those agencies will make initial contact by mail. You are welcome to bring any such letter to our office for verification. Never include social security or bank account numbers in an unencrypted e-mail or in a phone call you did not initiate.
If you choose to have our office prepare and file your federal and state tax returns, you will need to sign and return the engagement agreement on the reverse side of this letter. All professionally prepared tax returns must be filed electronically (“e-file”). If you want to file your own tax return for free, here is the link: https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free
IRS requires mileage logs for vehicles with business use. Here is the latest information for mileage deduction rates.You are required to send a Form 1099 to any individual, partnership or LLC that you paid $600.00 or more for services, rent or interest in the course of your trade or business. Payments to cooperatives, banks and other corporate entities are excluded. Wages in excess of $150 in any quarter require the filing of Forms W-2 and W-3 (for household employees you may file Schedule H with your tax return instead). If you would like us to prepare these forms, you will need to provide us with the information before January 27, 2021.
If you have questions on any of the above or other tax matters feel free to call, e-mail, or stop in. When you have your records ready, you may let us know and we will set up an appointment that is convenient for you. Evening or Saturday appointments can be arranged. If you would like worksheets or want to e-mail us information securely, send us an e-mail and we will open a Trustifi® portal for encrypted transmissions.
We collect nonpublic personal information about you from various sources, including:
* Interviews regarding your tax situation
* Applications, worksheets, or other documents that supply such information as your name, address, date of birth, phone number, Social Security Number, income, dependents' information, and other tax-related data
* Tax-related documents you provide that are required for processing tax returns, such as Forms W-2, 1099B, 1099R, 1099INT, 1099DIV, 1099MISC, 1099S, 1098, 1098E, 1098T, 1099SSA, 1099RBR, etc.
We do not disclose any nonpublic personal information about our clients or former clients to anyone, except as requested by our clients or as required by law.
We restrict access to personal information concerning you, except to our employees who need such information in order to provide products or services to you. We maintain physical, electronic, and procedural safeguards that comply with federal regulations to guard your personal information.
Pursuant to U.S. Treasury Regulations, you are advised that any federal tax advice included in this communication is not intended or written to be used, and cannot be used, to avoid any U.S. federal tax penalties, or to promote, market, or recommend to another party any transaction or matter.