Important 2020 Tax Year Considerations
As we head toward a new year and yet another tax season, the professionals at OUCU Financial Services stand ready to assist individuals and businesses with their tax needs.
This year has been a year like none other, and as we prepare to leave 2020 behind and head into 2021, we want to share some important and helpful information to help you make the most of your money.
Stimulus-Economic Impact Payment (EIP)
EIPs are not included in taxable income, but retain Notice 1444 and report the amount you received to determine eligibility for a Recovery Rebate Credit
All unemployment payments are taxable income and must be reported on your tax return. Those receiving unemployment benefits should receive Form 1099-G, Government Payments.
IRS Interest Payments
For those that experienced a delay between filing your tax return on time and receiving a refund the IRS sent interest payments. For anyone that received at least $10 the IRS will issue a 1099-INT. This interest is taxable income and must be reported on your tax return.
Taxpayers that take the standard deduction may also deduct contributions made to charitable qualifying organizations up to $300.
During the pandemic many families have had to hire workers to come into their home to assist with childcare, eldercare, and housekeeping. These workers are considered Household Employees by the IRS. If you paid a worker more than $2,200 during 2020 you are required to obtain an EIN prior to December 31, 2020 and issue a W-2 to the employee by January 31, 2021. You must also send a copy of the W-2 and W-3 to the Social Security Administration and file a Schedule H with your income tax return.
Required Minimum Distributions were waived for 2020- let your tax preparer know if you chose to waive this or not.
Distributions taken related to coronavirus are not subject to the 10% early distribution tax. Coronavirus related distributions can be repaid over 3 years or included in income in 2020 OR included in income over 3 years. Plan to discuss the best option with your tax preparer.
Consider ways to reduce your Adjusted Gross Income for 2020
- Contribute (or increase contributions) to a Retirement Account
- Contribute (or increase contributions) to a Health Savings Account
- Pay student loan interest – maximum deduction is $2,500 (MAGI limitations apply)
We're here for you!
OUCU Financial Services is here to assist you with tax and retirement planning. Tax Preparation and Retirement & Investment clients may email firstname.lastname@example.org for further assistance.
New clients may request a 2020 tax prep organizer online, by email at email@example.com or by calling 740-597-2820.
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