Happy fall, everyone!

It is time for a tax update again. I tried to get one out earlier this year, especially with the COVID 19 rules for forgiveness ever changing, however, we have been extremely busy and running short handed all summer. Finally, we are fully staffed! (While the IRS and DOR are not)

Further, below I have done my best to outline tax differences between the two candidates for President (next section below) as I have every election year.

  1. Due date was 9/15 for all corporate (extended) tax returns on a calendar year. Since its already past that date, the late file penalty for S Corporate filings is $205 per month per K-1 shareholder. Those penalties start on 09/16/2020 as well as later filings for any 1120S tax return filing using the calendar year. Additional interest and penalties will apply too, compounded daily. If you have not turned in your books/records for your 2019 1120S tax return, please do so immediately! I have several ways out of the penalty, but specific conditions must be met.
  2. New “Payroll tax cut” was put in place for the employee’s benefit effective September 01, 2020, but it’s only a deferral or “loan.” They all must be repaid between January and April 2021 unless congress “forgives” the amount (NOT LIKELY). The entire program is voluntary. No employer is required to do this. In fact, I would not suggest taking any action on this matter.
  3. 2019 Individual returns (extended) are due 10/15/2020. Information must have reached us at least by October 01, or timely filing cannot be guaranteed.
  4. $1,200 + stimulus checks. Likely, if your 2019 tax return is not filed, as soon as you do, your stimulus will be released. IRS is starting to get on top of this, hiring another 5,000 people to help with numerous telephone calls, and inquiries. If you were entitled to it, but didn’t receive it because 2018 data was used instead of 2019, you can get the credit on the 2020 tax return
  5. IRS is still very behind on any letter or tax return filed paper. They are still running very short-handed, and most employees are working from home, sometimes with limited access to taxpayer files. Allow 9 months to 1 year for any response! Payments, responses, and filings should all be electronic Few delays generally occur there. Even IRS notices are going out late via US mail (NOT quick and speedy). Audits are way down using fewer agents in the field, however computer exams continue.
  6. NEW!! For 2020 if you do not itemize, you will be allowed a charitable deduction of $300 per return.
  7. Home office clarification: Regardless of “due to covid/”Chinese Virus” or not, employees working from home do not have any means to write-off home office expenses. Only for businesses, including Schedule C, can this deduction be used, and it must be your principal/necessary place of business (See form 8829).
  8. We can now (finally!) electronically file 2019 amended personal federal returns. Paper would take forever!
  9. NEW! Appeals court rules that a criminal’s IRA can be garnished in order to pay restitution
  10. IRS along with the Justice Department is cracking down on employers that withhold payroll taxes and withholdings but use the funds for personal or other business expenses. These funds are called “trustee” taxes since they do not belong to the employer, but only being held temporarily until due. Fines can include employees that have check-signing authority with decision making. (NEVER play with the Treasury’s cash!)
  11. Still time for a SEP IRA if self-employed. Due and funded by 10/15/2020 for tax year 2019
  12. No “final” word yet except that PPP loan “forgiveness” will not have to reported on a form 1040 as cancellation of debt income.
  13. Proposed tax cuts/changes by President Trump.
    1. Tax cuts for the middle class (no details).
    2. 2017 changes already made-make permanent. Otherwise, they expire after 2025.
    3. Capital gains rate- lower the top tier rate of 20% down to 15%, and index for inflation.
    4. Index basis for capital gains for inflation resulting in a lower amount of “gain” to be taxed.
    5. If the Supreme Court entirely throws out Obamacare, the 3.8% surtax on net investment income (includes rentals, winnings, etc.) along with about 1% on earned income would end.
    6. Reduce corporate taxation from the reduced 21% to 20%.
    7. Allow 100% deduction of business meals and entertainment.
    8. Tax breaks to companies that invest in our own US supply chains, so that jobs to the US from get pulled out of China and other countries.
    9. Make 100% bonus depreciation Enhance the R&D tax credit and enhanced business asset expensing
    10. New “Platinum” Plan for black business startups and expansion. Pledged $500B (Will need Congress to get that one) to further reduce poverty and encourage growth and higher incomes
    11. This past Thursday (9/24/2020) President Donald Trump introduced his plan for affordable, high-quality health care, called the America First Health Care Plan. This plan, issued in an executive order, is primarily aimed at protecting people with preexisting conditions and combating surprise medical billing.

      The executive order directs the Departments of Health and Human Services (HHS), Labor and the Treasury to maintain and build upon existing actions to: Expand options for affordable health care and access to affordable medicines; Ensure consumers have access to meaningful price and quality information before the delivery of care; and Reduce waste, fraud and abuse in the health care system.

      The executive order specifically directs HHS to work with Congress to reach a legislative solution to end surprise medical billing by Dec. 31, 2020. If a legislative solution is not reached by that date, the executive order directs HHS to take administrative action to prevent out-of-pocket expenses that cannot be reasonably foreseen.

  14. Proposed tax changes by Former Vice President Biden campaign
    1. Reversal of the 2017 Trump tax cuts. No specifics.
    2. Increased taxes (not sure where/how/who) to finance bold new spending ($4 Trillion was discussed)
    3. Higher teacher pay and more teachers
    4. More stimulus for families (for example, direct payments from the US Government)
    5. education incentives and payments.
    6. student loan forgiveness.
    7. Make employers offer payroll deduction for IRAs. Sounds like what former President Obama proposed back in 2016. No further details.
    8. Wants to “normalize” the differences between the 401K and the IRA deduction on paychecks; no details available, except that if MAX for 401K is $28,000, so will IRA max be the same.
    9. (Note: specific information is difficult to find)- I have researched campaign websites, and tax newsletters, among others. All I can really find are similar things that the Obama/Biden administration used and a few speech talking points. Items appear to be vague at this time.

Still time to schedule your tax planning for 2020 tax year! Just call the front desk and we can schedule you!

We are also booking NOW for remaining available slots for tax season 2021 to prepare 2020 tax returns.

I don’t know if we will be offering in-office meetings, or telephone/facetime only. If the vaccine (4 pending) works after level 3 trials, we likely will be offering in or out of office meetings. Some clients preferred telephone, especially if live far away! You can also pre-request an extension and book into the early summer or later if you wish. We are open year-round!

Have a great rest of 2020!!