2020 Newsletter – As if 2020 wasn’t bad enough, it’s tax season!

COVID-19, pandemic, masks, PPP, EIDL, vaccine, distancing, stimulus payment(s), tax credits – you have questions and we have the tax related answers.  Treasure Valley Tax (always 100% owned by Ken & Deb Priebe) has been here for 13 tax seasons and we look forward to helping you again this year.

What can you expect on the 2020 tax return?

CARES Act – The CARES Act provided for direct payments (economic impact / stimulus payments) based on your filing status and AGI. Payments were $1,200 for individuals, $2,400 for married couples, and $500 for each qualifying child. The payments phased out for AGIs above certain limits. The payments were based on filing status and income from either 2019 or 2018 tax returns. The December 27th, 2020 Stimulus bill passed into law approved another round of economic / stimulus payments. Generally, the dollar amount is half of the original and all payments will be distributed by January 15, 2021. Although the second round may have been received in 2021, both rounds of the Stimulus Payments are considered advances against a 2020 credit on your tax return and will be reconciled on your 2020 tax return against the credit. The payments will not reduce your refund or increase any amount owed on your 2020 return. You will receive an additional credit on your return if your filing status and income level in 2020 qualifies you for a larger payment. If your filing status and income level in 2020 would reduce your payment, you do not have to repay any amount received. We need to know how much you received (the IRS sent out form 1444 with the checks or bring a bank statement showing the deposits).  If the calculation shows you should have gotten more, you will get more.  If it shows you were paid too much, you do not have to pay it back. 

For the 2020 Earned Income Credit, you are allowed to use the earned income from the 2019 return or from 2020, whichever gets you the best tax answer.

Charitable contributions can be deducted up to $300, even if you take the standard deduction.  These contributions must be backed up with receipts and non-cash contributions do not qualify.  In 2021 the amount allowed for Married Filing Joint increases to $600.

New 1099-NEC – this replaces some of the 1099-MISC you may have received in the past for providing services as an independent contractor.  Make sure to document your expenses related to the income to reduce your tax.

Tax extenders. Several provisions that allowed for deductions and credits expired at the end of 2017. Many of the provisions have been extended for 2020 and also made retroactive for 2018 and 2019. Some of the more popular provisions include the above-the-line deduction for tuition and fees, the deduction for mortgage insurance premiums, and the Residential Energy Credit.

Business Assistance:  The original PPP loans are open again for application for those who missed applying the first time around.  Their integration with the EIDL loans has changed to be more favorable to taxpayers.  PPP2 will be open for application but the criteria for a successful application is more stringent.  Covid pay – a payroll tax credit is available if you paid someone on a qualified Covid absence from work.  Lastly, an Employee Retention Credit is available for 2020 and the first two quarters of 2021 if your business meets the requirements.

SECURE Act – Two of the more notable changes in the SECURE Act include the repeal of the maximum age for making contributions to an IRA and increasing the beginning age for mandatory distributions from an IRA. Starting in 2020, you can make deductible contributions to an IRA at any age provided all requirements are met. For distributions required to be made after December 31, 2019, if you reach the age of 70½ after this date, the required beginning age is increased from 70½ to 72. Note: The CARES act waived all RMDs for 2020. The SECURE act also reduced the floor for deducting medical expenses to 7.5% of AGI.  A new item for 2021 is that business meals purchased from a restaurant will be 100% deductible instead of the 50% allowed previously.

Things to do in 2021 that can affect 2020 taxes. There is very little that you can do to impact your 2020 taxes after December 31, 2020. However, two things that can be done if you qualify, are making a contribution to your traditional IRA and/or your health savings account (HSA).

IRA deduction. For 2020, you may be able to contribute up to $6,000 ($7,000 if you are at least 50 years old) to an IRA. Contributions for 2020 can be made up until April 15, 2021. If the contribution is made to a traditional IRA, you may qualify for a deduction on your 2020 return. For 2020 there is no age limit on making a contribution to a traditional IRA or Roth IRA. In addition, contributions to any type of IRA (traditional or ROTH), might qualify you for the Retirement Savings Contribution Credit.

HSA deduction. This is similar to the IRA, you can make 2020 contributions to your HSA up until April 15, 2021. The total amount that can be contributed by you and your employer ranges from $3,550 to $9,200 based on whether you have self-only or family HSA qualifying coverage and your age.

IRS hot items. There always seems to be a number of items that the IRS is focusing on. Some of the current topics the IRS is focused on are foreign assets, cryptocurrency transactions, and unreported income.

Cryptocurrency transactions. Cryptocurrency (i.e. Bitcoin, Ethereum, etc.) is becoming more and more common. Transactions involving cryptocurrency have tax implications and the IRS has included the following question on Form 1040. “At any time during 2020, did you receive, sell, send, exchange, or other acquire any financial interest in any virtual currency?”  If you had any transactions with virtual currency (Bitcoin, etc) please have the detailed info for us at tax time.

Unreported income. If you are making extra money by doing side jobs, be it driving for a ridesharing company such as Uber or Lyft, selling crafts on Etsy, delivering meals with Grubhub or DoorDash, renting out a room in your house via Airbnb, or any other way, it needs to be included on your tax return. Unless specifically excluded under the Internal Revenue Code, all income is taxable. This includes income that is not reported to you on one of the various Forms 1099, foreign income, and barter income.

Federal and state differences. When it comes to taxes, most of what you read and hear from the media has to do with federal tax law. Remember that each state has its own tax law and just because something is not allowed for federal taxes (or you do not qualify) does not mean that you are not able to include it on your state tax return.

Idaho first-time home buyers can get a deduction for saving money for their home purchase.  Open a specially designated account and contributions of up to $15,000/$30,000 (S/MFJ) can be deducted on your Idaho return.  Account deposits cannot exceed $100,000 over the lifetime of the account.

Likely filing can begin the week of January 25th.  The recent tax changes could make it later.

To request an organizer call Kathy, or e-mail kathy@treasurevalleytax.com.

Tax Season Hours:

Monday through Thursday           8:00am – 6:00pm

Friday                                                    8:00am – 5:00pm

Saturday                                              9:00am – 3:00pm

Sunday                                                 closed

But you might catch us in at any time …  😊

Ken, Deb, Ann, Norma, Jane, Cheryl, Kathy, Derek & Krystal

Phone: 208-452-5700

Fax: 208-452-5711