Feb 9, 2021 Reminders as you Prepare your 2020 Taxes
As you or your tax preparer start to work on your 2020 taxes, there are a few things we wanted to remind you.
- 1099s – TD Ameritrade is releasing 1099s in waves. The first wave of 1099s was released on January 14th. The second wave of 1099s released on February 5th, and the third wave will be released on February 11th. You can find your tax documents on your advisorclient.com login or through your LRIA portal. If you elect to receive these documents via paper, please allow 5 to 7 business days to receive them after the release dates.
- 60 Day Rollovers – In March 2020, it was announced that required minimum distributions (RMDs) were not required. Some clients had already taken that distribution and elected to roll it back into the IRA account as a 60-day rollover or a special COVID rollover. The 2020 1099-R will not reflect that you rolled the distribution back into your IRA account, so you will need to enter it in your tax software or let your CPA know.
- QCDs –Qualified charitable distributions (QCDs) made in 2020 are not taxable. Your 1099-R will only show the amount before the QCD. You will need to enter the amount that went to charity in your tax software or let your CPA know. We are mailing letters with the charitable distributions we have recorded. You will also need to retain a receipt of the contribution from the charity.
- Unemployment Income -Unemployment compensation is taxable and must be included as gross income on your tax return. If you received unemployment income, it reports on form 1099-G.
- Home Office Deduction – The home office deduction is available to qualifying self-employed taxpayers, independent contractors, and those working in the gig economy. However, the Tax Cuts and Jobs Act suspended the business-use-of-home deduction from 2018 through 2025 for employees. Employees who receive a paycheck or a W-2 exclusively from an employer are not eligible for the deduction, even if they are currently working from home.
- Charitable Deduction for Non-Itemizers – Generally, individuals who take the standard deduction cannot claim a deduction for their charitable contributions. However, the CARES Act permits these individuals to claim a limited deduction on their 2020 federal income tax returns for cash contributions made to qualifying charitable organizations and still claim the standard deduction. Under this change, individuals can claim a deduction of up to $300 for cash contributions made to qualifying charities during 2020. This deduction does not apply to donated property.
- IRA & HSA Contributions – There is still time to contribute to IRA accounts or HSA accounts for 2020. Contributions are due by the earlier of April 15, 2021 or your tax return filing date.
- Tax Refunds – The IRS encourages any taxpayer seeking a tax refund to file their tax return as soon as possible. The IRS anticipates issuing most tax refunds within 21 days of the IRS receiving a tax return if the return is filed electronically with direct deposit. To avoid delays in processing, the IRS encourages people to avoid using paper tax returns whenever possible.
- Important Dates!
- February 12th – IRS starts accepting and processing tax returns
- The first week of March – refunds start being processed
- April 15th – Deadline for filing 2020 returns or filing an extension
- October 15th – Deadline for filing for those who requested an extension
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