Much has changed for the 2020 filing due to the Covid-19 relief aid passed by Congress earlier this year. Here are some things to note for individuals as we move toward the end of the year and tax season is upon us once again.
- $1200 payments received by taxpayers as economic stimulus are not taxable income. They are considered refundable tax credits.
- If one received enhanced payments from the federal government due to unemployment (additional $600), this will be considered taxable income. This, along with state unemployment benefits received, will be considered total unemployment taxable income for the year. If one did not have withholding taxes on the enhanced benefit, or the state benefits, estimated tax payments should be made. The next due dates for estimated tax payments are 9/15/20 and 1/15/21.
- Retirement plan distributions for those under 59 1/2 will have the 10% penalty waived for Coronavirus-related distributions.
- Eligible individuals who took distributions from their retirement plans can include them in gross income over a 3-year period. This givers recipients of distributions 3 years to pay the tax.
- Loans from qualified retirement plans are distributions if more than $100,00 or 50% of the present value, and thus are taxable income. This has been raised from $50.000 (or 50% of present value).
- Minimum Required Distributions (RMD) for IRAs and other plans has been suspended for 2020.
- Charitable contributions can be deducted up to $300 for those individuals who do not itemize their deductions.
- The requirement that individuals obtain a prescription in order to be reimbursed for over-the-counter medicines and drugs has been eliminated for HSAs.
Individual taxpayers should contact LFC to assess their tax situation early this year to ensure the 2020 tax filing goes smoothly and estimated tax payments are accurate due to the recent tax changes.
Business owners should contact LFC to assess their tax situation for 2020 as well.
Set appointments by visiting the LFC website: www.lfconinc.com
