Happy September! I hope you are doing well. Today’s newsletter has some additional year-end reminders and tax planning tips along with a few updates and current events. Before we dive in, I wanted to let you know that we continue to see many tax notices, especially from the IRS. The vast majority have been IRS errors due to timing so please do not panic if you get something from the IRS. Be sure to scan and send it to us so we can research but, odds are good, it is an IRS mistake.
Requirement for Paid Sick Leave:
This is the year of acronyms! We started in March with the FFCRA or the Families First Coronavirus Response Act. This act made it mandatory for employers to pay sick leave, but it also provided for tax credits to offset most of the cost. It was the government’s first attempt to encourage employees to stay home if they are sick or if they need to care for someone who is sick. It is super complicated and we have a much longer blog about it on our website, however, for today please know that there are two different tax credit amounts based on the reason for the sick pay. If you are paying someone to stay home to care for a child who has no child care then the daily pay is lower than paying someone to stay home because they have tested positive.
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Individual Tax Planning:
If you did not receive a stimulus payment from the US Treasury (also called an EIP or Economic Impact Payment) based on your 2018 or 2019 tax return, you could still qualify based on your 2020 return. This makes 2020 tax planning more important for some of you. There are a few things to help reduce your adjusted gross income for 2020 including the removal of the RMD requirement from your retirement accounts and the allowance of the $300 above the line deduction for charitable contributions. If you did take out a qualified Coronavirus distribution from your retirement accounts and you did not receive the advance EIP then we should discuss options to defer this income to keep your AGI below the threshold in 2020 if possible. Some tax planning will require a crystal ball to figure out the law changes, however, we have some tools to make it work.
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In this volatile year with ever changing tax laws, it is extremely important for both individuals and businesses to maintain a solid accounting system. We expect to see more changes to the tax law which could change allowable deductions for 2020 so proper tracking is more important than ever. If you need any assistance with your business please don’t hesitate to reach out to Crystal Brady, our accounting manager. She can be reached at firstname.lastname@example.org.
Upcoming due dates:
We have a couple of big deadlines coming up in the next few weeks, including September 30th which is the filing date for Trusts on extension and October 15th which is the filing date for Individual form 1040s on extension. Missing these filing deadlines could result in substantial interest and penalties so please email or call if you need any assistance.
We are getting a lot of questions about the timing for forgiveness so I just wanted to briefly mention it here. Many banks are waiting to see if Congress is going to pass a safe harbor threshold for automatic forgiveness for certain smaller loans and they aren’t in a rush to start the forgiveness process. Since you have 10 months to apply for forgiveness, the banks can drag their feet a little bit.
Thank you for reading to the end! Our new “norm” is keeping us on our toes and we truly appreciate your patience and understanding as we work to circulate good information.
The owner of McNurlin, Hitchcock & Associates, PC a certified public accounting firm located in Lakewood, Colorado. Kim specializes in all areas of accounting, tax strategy planning, business management, and financial statement reporting. Kim can be reached directly at email@example.com.