This year has been unlike any other in recent memory. Front and center, the COVID-19 pandemic has touched virtually every aspect of daily living and business activity in 2020. In addition to other financial consequences, the resulting fallout is likely to have a significant impact on year-end tax planning for both individuals and small businesses.
In response to the pandemic, Congress authorized economic stimulus payments and favorable business loans as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act also features key changes relating to income and payroll taxes. This new law follows close on the heels of the massive Tax Cuts and Jobs Act (TCJA) of 2017. The TCJA revised whole sections of the tax code and includes notable provisions for both individuals and businesses.
This is the time to paint your overall tax picture for 2020. By developing a year-end plan, you can maximize the tax breaks currently on the books and avoid potential pitfalls.
Keeping all that in mind, we have prepared the following 2020 Year-End Tax Updates. For your convenience, we have put updates into three different categories:
Now that Joe Biden has been projected as the winner of the presidential election, you may wonder if your federal taxes will be affected. We have compiled that information and it may be found here. Be aware that the concepts discussed in these articles are intended to provide only a general overview of year-end tax planning. It is recommended that you review your personal situation with a tax professional.
Additional Update 12/27/20: In the waning days of 2020, Congress passed a new economic relief package for individuals and businesses. The bipartisan bill was signed into law on December 27.
Among numerous other changes, the new law provides another round of economic stimulus payments, extends unemployment benefits and restores forgivable small business loans under the Paycheck Protection Program (PPP). It also addresses certain tax-related provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act and other tax issues.
For instance, the new law allows businesses to deduct costs relating to PPP loans. Previously, the IRS had issued guidance stating that these expenses were not deductible. In addition, the new law authorizes a deduction of 100% of business meal expenses for 2021 and 2022, instead of the usual 50% limit. Furthermore, it extends various other provisions, such as the lower medical deduction floor based on 7.5% of adjusted gross income (AGI), and restructures employer tax credits for retaining employees and offering paid family and medical leaves.
If you have any questions about how this new legislation affects your 2020 returns or any other tax matters, please do not hesitate to contact our office. We would be glad to schedule a meeting to discuss your personal situation.
Be aware that the concepts discussed in these articles are intended to provide only a general overview of year-end tax planning. It is recommended that you review your personal situation with a tax professional.