We’re all ready to put 2020 to bed for good! As tax day approaches – Thursday, April 15th, 2021 – here are the latest changes and a few tips to ensure smooth sailing for your return this year and looking forward into next year.
New and Noteworthy: Tax Preparation Checklist for Your 2020 Return
- Are you up-to-date with the basics?
The standard maximum deduction has increased. You can now claim $12,400 if you file as a single individual, or $24,800 if you file jointly.
- Did you receive a stimulus payment?
Your CARES Act stimulus payment will not be taxed; the IRS will treat it as an advance of your tax refund for the 2020 tax year.
- Do you qualify for a recovery rebate?
Recovery Rebate Credits may be available to you if you did not receive an Economic Impact Payment, or received a reduced stimulus payment.
- Did you pay interest on your 2019 tax refund?
If you received a federal tax refund in 2019, it is possible that you were paid interest; these interest payments are taxable. If you received an interest payment great than $10.00, the IRS will send you a form so you can report the payment on your 2020 return.
- Did you receive a Paycheck Protection Program (PPP) loan?
If your business received a PPP loan this year, the expenses documented to justify the loan are deductible and forgiven debt income is not subject to tax. (This is contrary to early feedback from the IRS.) Paycheck Protection Program (PPP) loans have a specific tax status.
- Are you eligible for additional PPP loans and/or 2021 payroll tax credit programs?
If your business revenues in 2020 fell more than 25% compared to the same quarter in 2019, you may qualify for additional PPP loans or payroll tax credits, even if you already received a PPP loan.
Make the Process Easier Every Year
While the list above provides specific considerations for this year, taking the steps below will ensure your taxes get prepared efficiently and filed on time every year:
- While some tax preparation delays fall out of your control (late K-1 forms from partnerships or S corporations, for example), plain old procrastination, followed by disorganized and/or incomplete business records are the most common reasons for last-minute preparation and filing. If you haven’t started already, there’s no better time than the present. Gather your documents now, and commit to more systematic record-keeping going forward.
- Make a plan to submit your tax information to your Davie Kaplan tax advisor by March 15 every year, even if you have a few documents still outstanding. We can start your return, build a punch list of what’s still needed – and avoid any last-minute filing frenzy.
- Get organized. Take advantage of our electronic tax organizer and client portal to upload documents.
- Provide summaries for your expenses, rather than actual receipts. Organize them by category – business expenses, medical expenses and charitable deductions.
- Use the tax organizer to help you account for all required documents; missing documents will be identified as “open.”
- Upload your documents all at once (when possible) instead of submitting lots of separate documents over an extended period.
If this is not possible, send us your documents via FedEx or UPS; we continue to experience significant delays with regular USPS mail service. Similarly, we encourage you to authorize electronic delivery of final returns and authorization forms via our client portal – it’s always quick, secure and dependable.
- If you don’t already use a good, intuitively simple bookkeeping application (such as Quickbooks) commit to implementing one sooner rather than later in the year. If you need assistance, Davie Kaplan has several excellent Quickbooks Pro advisors who can guide your initial set-up and training, or even provide ongoing bookkeeping support if needed.
2020 saw plenty of upheaval, but one thing never changes — when tax season rolls around. Using this proactive tax preparation checklist will help you stay organized and make the most of your money. At Davie Kaplan, our tax professionals are here to help you strategize and offer sound, forward-thinking tax advice so you and your business can thrive in any economic environment.