Skilled Office Services
I am committed to helping you.
Call  810-793-7230
Q & A - ​2020 Income Tax Changes

Question:  How will the 2020 stimulus payment I received  effect my 2020 income tax return?

Answer:  Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, most Americans will receive direct economic recovery rebate payments of $1,200 ($2,400 for couples filing jointly), plus $500 more for each child under age 17. The payments will start to phase out for joint filers with adjusted gross incomes above $150,000, head-of-household filers with AGIs above $112,500, and single filers with AGIs above $75,000. 

Technically, the rebate is an advance payment of a special 2020 tax credit. You'll reconcile your rebate on your 2020 return. For most people, the rebate will equal the tax credit allowed. Taxpayers whose credits exceed their rebates can claim the balance on their 2020 returns. We expect you won't have to repay the IRS if the payment you got is more than your credit.

Question:  How have donations to charitable organizations changed for 2020?

Answer:  To encourage charitable giving in 2020, the CARES Act includes two tax provisions that reward people who donate to charity.

First, a new "above-the-line" deduction of up to $300 is allowed for cash donations to charity in 2020. Donations to donor advised funds and certain organizations that support charities are not deductible. You can't claim this deduction if you itemize deductions on your 2020 tax return (i.e., you must claim the standard deduction).

For taxpayers who do itemized on their 2020 return, the 60% of adjusted gross income limit that normally applies to cash contributions is waived. That means you can deduct more of your charitable cash contributions this year. As with the new above-the-line deduction, donations to donor advised funds and supporting organizations don't count.
If  you have a question that you would like to see answered here, please use the box below to send a message.

Question: What happens to my IRAs, 401(k) plans and other retirement accounts?

Answer:  Taxes are generally deferred when you save money in IRAs, 401(k) plans and other retirement accounts. However, once you turn age 72 (70½ before 2020), you have to start withdrawing money out of those accounts whether you need it or not. And that's when the IRS claims its cut. These withdrawals are called required minimum distributions (RMDs), and failure to take an RMD triggers a stiff penalty equal to 50% of the amount you should have withdrawn. 
First-time RMDs are due April 1, while others are due by the end of the year.

Many seniors were worried about having to take RMDs when the stock market is in the dumps. Since there probably won't be enough time for the market to recover before their RMDs would be due, a lot of retirees would be forced to sell their investments for a loss or at a low price to avoid the hefty RMD penalty.

To avoid this result, the CARES Act suspends RMDs for 2020. This applies to both first-time RMDs due April 1 and to other RMDs that aren't due until December 31.  This is a hidden benefit of the Coronavirus Stimulus Bill: You Can Wait to Take Your RMD.

Question: Does the CARES Act include provisions that make it easier to get money out of my retirement account?

Answer:  YES!  (up to $100,000) if you're infected by the virus, have family members who catch it, or experience adverse financial consequences because of it. First, the 10% penalty for withdrawals by people age 59½ or younger is waived if you're affected by the virus. Taxes on withdrawals by people affected by the coronavirus will also be spread out over three years. You can also recontribute the money to an eligible retirement plan within three years, without regard to that year's cap on contributions, and have it treated as a tax-free rollover.

In addition, the amount a person affected by the coronavirus can borrow from a 401(k) plan is doubled from $50,000 to $100,000, and repayment requirements are relaxed.
HomeIncome Tax PreparationContact