LINDA ROZET, CPA, PC.
7575 W. Peoria Ave Ste A-101
Peoria, AZ 85345
YEAR END NEWSLETTER
December 8, 2020
Dear valued client:
Wow what a year!
I hope you have had a wonderful and blessed year! We hope you and your families are safe and healthy! We offer prayers to the many families who have unfortunately lost loved ones this past year!
Our team went ten months straight through tax season this year and it was quite the challenge. We realize we had some slower response times this year, but we tried as best as we could to embrace all of the changes and deadlines that came our way, and we all know how many there were.
I would like to pass on the most common tax law changes that may educate you and help you with decision making and tax planning.
TAX LAWS CONTINUING TO BE IN EFFECT……...
NO LONGER A PENALTY FOR NOT HAVING HEALTH INSURANCE
ELIMINATION OF PERSONAL EXEMPTIONS
VERY LARGE INCREASE IN STANDARD DEDUCTIONS
GENERAL DECREASE IN PERSONAL INCOME TAX RATES
1040SR SIMPLIFIED TAX RETURN FOR SENIORS
INCREASE OF THE CHILD TAX CREDIT TO $2,000, WITH A MUCH HIGHER ALLOWED ADJUSTED GROSS INCOME PHASEOUT
NEW STUDENT LOAN DISCHARGE TAX EXEMPTION-SPECIAL CIRCUMSTANCE
ELIMINATION OF ITEMIZED DEDUCTIONS PREVIOUSLY SUBJECT TO THE 2% OF AGI LIMITATION, SUCH AS INVESTMENT EXPENSES EMPLOYEE UNREIMBURSED EXPENSES, TAX PREPARATION FEES, SAFE DEPOSIT BOX, ETC.
$10,000 LIMITATION SET ON ALLOWED REAL ESTATE, SALES AND INCOME TAXES
HOME EQUITY LOAN INTEREST NOT DEDUCTIBLE UNLESS PROCEEDS USED TO PURCHASE OR IMPROVE MAIN HOME
GAMBLING LOSSES NOW INCLUDES TRAVEL TO/FROM THE CASINO
CONTINUED 20% QBI DEDUCTION FOR QUALIFIED BUSINESSES
ELIMINATION OF LIKE-KIND EXCHANGE RULES FOR EQUIPMENT
EXPANDED DEFINITION OF QUALIFIED SECTION 179 BUSINESS EQUIPMENT
ENTERTAINMENT EXPENSES NO LONGER DEDUCTIBLE, MEALS STILL DEDUCTIBLE
WHAT’S NEW FOR THE 2020 TAX FILING YEAR?
WAIVED REQUIRED MINIMIMUM DISTRIBUTIONS FROM RETIREMENT ACCOUNTS FOR THOSE 70 ½
FOR 2020 INSTRUMENTS.... ALIMONY PAYMENTS NO LONGER DEDUCTIBLE AND ALIMONY INCOME NO LONGER TAXABLE. NO CHANGE WITH INSTRUMENTS FINALIZED UNDER PRIOR LAW.
$300 ABOVE THE LINE CHARITY DEDUCTION EVEN FOR THOSE NOT ITEMIZING DEDUCTIONS
THE IRS SOLAR TAX CREDIT HAS BEEN REDUCED TO 26% FROM PREVIOUS 30%.
STIMULUS CHECKS ARE NOT TAXABLE INCOME. THEY ARE TREATED LIKE AN ADVANCE OF A PART OF YOUR 2021 REFUND
NO EARLY WITHDRAWAL PENALTY ON 401K WITHDRAWALS FOR THOSE UNDER 59 ½ FOR THOSE THAT EXPERIENCED A COVID-19 LOSS (NOT SPECIFICALLY DEFINED YET)
IF YOU DID TAKE AN EARLY RETIREMENT WITHDRAWAL…. THE OPTION TO PAY THE FUNDS BACK IN THREE YEARS AND GET A REFUND OF TAXES PAID
NOTICE 1444 ECONOMIC IMPACT PAYMENT-WILL BE NEEDED TO PREPARE YOUR TAXES. THIS IS A RECONCILIATION SHOWING THE PAYMENT YOU RECEIVED VERSUS THE PAYMENT YOU WERE ELIGIBLE TO RECEIVE
IRA CONTRIBUTION LIMITS REMAIN UNCHANGED AT… $6,000 WITH $1,000 EXTRA ALLOWED FOR OVER AGE 50 AND 401K CONTRIBUTION LIMITS SLIGHTLY INCREASE TO $19,500 WITH $6,500 EXTRA ALLOWED FOR OVER AGE 50
THE IRS PIN PROGRAM IS BEING OFFERED TO ANYONE WHO WOULD LIKE TO APPLY FOR A NUMBER. THIS IS USED TO VERIFY THE IDENTITY OF THE PERSON ACTUALLY FILING THE TAX RETURN. AVAILABLE MID JANUARY.
REMINDER THAT UNEMPLOYMENT BENEFITS ARE TAXABLE AND YOU MUST INCLUDE A 1099G TAX FORM WHEN FILING YOUR TAXES
A HELP-LINE IS AVAILABLE FOR ECONOMIC STIMULUS PAYMENTS AT 800-919-9835
THE IRS HAS MADE IT EASIER FOR MORE PEOPLE TO QUALIFY FOR TAX RELIEF ON PAST TAX DEBT. UTILIZE THIS RESOURCE TO SEE IF YOU MAY QUALIFY
THOSE THAT RECEIVED PPP LOAN ASSISTANCE-NEED TO FILE FOR FORGIVENESS FOR QUALIFIED EXPENSES AND REMINDER THAT EXPENSES PAID WITH PPP FUNDS ARE NOT DEDUCTIBLE. I AM STILL RECEIVING TRAINING ON THESE NEW REGULATIONS.
BE FAMILIAR WITH ELIGIBLE COVID EMPLOYEE ASSISTANCE, SUCH AS EMPLOYER RETENTION CREDITS, COVID PAY, DEFERRED SOCIAL SECURITY TAXES
NEW FORM 1099-NEC (NON-EMPLOYEE COMPENSATION) CONTRACTOR PAYMENTS ARE NO LONGER TO BE REPORTED ON FORM 1099 MISC
I’d also like to encourage you to explore the various resources that are available on our office website.
Pages will continue to be updated as the tax season approaches.
” FINANCIAL CALCULATORS” are available on the website (tools for savings calculations, retirement contributions, payroll deductions, budgeting tools, credit score analysis and Earned Income Credit calculations).
Credit/Debit card payments are continued to be accepted through a payment option on the Home Page, in addition to, of course, in-office and phone payments.
Tax Organizers for new clients as well as some common requested forms are available.
You may find some very useful information on the FAQ page and you may enjoy reading client comments on the TESTIMONIAL page.
I would love to receive some additional current client TESTIMONIALS so feel free to email in any comments that you would like to share with others as a part of that website page! That would be very much appreciated, valued and enjoyed!
Another feature offered on the website is a file sharing program called “MY FIRM FILES”. This is available for anyone needing to submit sensitive data that is too large for regular email or for anyone that prefers the extra security of the encryption process. Please contact us to be issued a password.
Our office has installed a sneeze guard at the front counter, we are continually sanitizing our environment and we adhere to the suggested social distancing guidelines with markings in our office. Our staff wear masks during all client visits, and we are requiring masks to be worn for any in person interaction for the safety of all.
PLEASE REFRAIN FROM VISITING THE OFFICE IF YOU HAVE HAD ANY RESPIRATORY SYMPTOMS IN THE LAST 10 DAYS. YOUR APPOINTMENT CAN ALWAYS BE RESCHEDULED.
We continue to offer evening, as well as Saturday tax appointments. A lot of clients have been very receptive to this extra availability.
To continue to do our part at helping keep our community safe and healthy, we recently now offer a much larger variety of options for your tax appointment. We will have designated days of the week that offer remote scheduling options and we will keep with the traditional face/face interview appointments on certain days of the week. We will announce if anything changes on this following the CDC and State/City guidelines.
I’m very happy to announce that Thomas Shewman will continue to be working with me as an Accountant/Tax Preparer. Tom has been employed for 2 1/2 years and brings a lot of positive, younger energy to the workplace. He specializes in QuickBooks bookkeeping, as well as beginning tax preparation tasks. Tom works evening and Saturday hours.
I'm very happy to announce that Janna Mortensen has joined our team as an experienced Bookkeeper. Janna has come on board with lots of energy and has jumped right in and started contributing to the team. Janna will also be handling the majority of our routine payroll processing, as well as special projects. Janna also works part-time in the office.
Ida will be relocating but we hope to continue to have her great assistance by working remotely to help the team when she settles into her new location. With today’s technology, it makes it very feasible for scheduling, phones and appointment check in’s to be handled remotely.
We will be adding one-two new team members this tax season and are currently in the hiring/training process. Therefore, there will likely be some new faces.
We also have a vision to implement a Project Management System so we can more efficiently keep track of work in progress and better communicate the status of work.
SENSITIVE STAFF NEWS
I do need to reemphasis the following yearly reminder as this unfortunately still has not been fully previously understood by all …….
The tax season is a very demanding time and there is increasing new regulation that entails a tremendous amount of important work to be handled within a very short time. Therefore, if you can keep this in mind and please be patient in waiting for responses it would be of utmost appreciation. We understand the tendency is to be anxious while waiting upon tax results. We simply just ask for you to please be patient as we do the best professional job we can. Keep in mind, sometimes this can entail additional time and judgment.
It is our professional policy to generally not prepare tax returns while clients wait and not to release tax results until your pickup appointment or until your package arrives in the mail. I realize there will be some limited circumstances when this information is needed in advance, such as the decision to apply refunds to the following tax year. That can be considered an exception to the policy.
Also keep in mind that the time we estimate to complete tax returns during the peak season is simply AN ESTIMATE. We do have daily impromptu issues that arise so this completion time can likely be delayed.
We do hope turn-around times improve this year as we have made many changes to help strive for things to be more efficient in the office.
Please respect our professional decision on these policies as they are established for reasons. We really appreciate it!
If we can all work together on these requests and policies, it will make for a much smoother tax season. Many thanks on this in advance!
Please utilize the very secure drop box that exists on the west side of our office building. This is a great feature to enable paperwork to be dropped off 24/7 and especially for routine paperwork or signature forms to be deposited if there is not a need to ask a question of the receptionist. Of course, feel free to confirm receipt when desired.
IRS allows E-filing for the most three recent tax years.
Amended tax returns are now eligible to be E-filed
Again, we’d like to emphasize that we offer tax appointments through ZOOM, SKYPE OR PHONE for anyone who is interested. This may be a great option for those of you who have relocated, who aren’t feeling well or would like to refrain from coming into the office in person.
The IRS is continuing to concentrate their efforts in community outreach in the areas of rental property owners and small business clients. If this applies to you, please remember to keep good records of all income and business expenses as this paperwork is required to support any potential deductions claimed on your return.
It is very important to keep an accurate mileage log to support your business use of a vehicle. Just as important is proper documentation of any business meals/entertainment and per diem or travel allowances. Please be prepared to submit this documentation during tax preparation. I am always available to offer advice in any of these technical areas.
IRS has yet to announce the opening of the e-filing tax season. It will most likely be LATE January. Stay tuned for further information.
Deadline to file the 2020 Tax Returns is April 15th this year
We hope to be hearing from you soon in regards to the preparation of your tax returns. As always, your continued business is greatly appreciated! We have opened up the calendar for tax appointments at this point so you can schedule whenever you are ready. Feel free to email or call with a request for a specific day and/or time for your appointment and we will try our best to accommodate that. As a reminder, evening and weekend appointments are offered. Once again this year we will be using income tax organizers and would appreciate them being filled out as best as you can to help recap the accuracy of your return details, (especially anyone with a small business.) Even though it may not seem needed from your perspective, they are a very helpful tool as I may only talk to many of you once a year.
As another reminder, once again this year, I am requesting that we place any large special projects and prior year tax returns on hold during the Jan-April time frame unless it is extremely urgent. If you are behind in your bookkeeping or income tax filings, please contact me and make special arrangements to handle your needs. Due to the demands of the tax season, I regret that as a general rule, we do not have the resources to work on special projects or prior year tax returns during this time frame. I feel this is only fair as a courtesy to all clients trying to meet the regular income tax filing deadlines.
The options for tax preparation again this year are your own personal choice. While some feel that certain tax issues are best handled and discussed in person, others prefer submitting data electronically if your tax situation is similar to last year and if there isn’t much that warrants a new discussion.
Income tax paperwork can always be mailed, emailed, faxed dropped in the drop box or delivered to me by a courier service.
YEAR END AND YEAR-ROUND REMINDERS
The following list is a summary of what I feel are important tasks to review before year end. A lot of these I feel are worth repeating, as many of these are frequently overlooked by many businesses and individuals each year.
- Mail your January mortgage payment early enough to be posted this year if you are needing deductions or HOLD your January mortgage payment to defer deductions if your itemized deductions are LIMITED this year
· Make donations this year of any unused household items
· Take advantage of the AZ School Tax Credits http://www.azdor.gov/TaxCredits.aspx
- Take advantage of the AZ Charities that provide assistance for the Working Poor Tax Credit http://www.azdor.gov/TaxCredits/QualifyingCharitableOrganizations.aspx
- Request a personal tax projection from me if you have had an issue with under-withheld taxes in the past. (The tax planning charge would be quite justified if it helps you in managing your financial affairs and eliminates year end surprises)
· Make HSA, Educational and Individual IRA contributions
· Keep better track of charity, medical and business mileage for the self-employed
- Sign up for employer flexible spending accounts (Section 125 plans) and retirement benefits (dependent care, medical, 401K)
· Make sure to use all the funds left in your flexible spending accounts
- Make 4th quarter estimated income tax payments (AZ deduction counts this year if mailed during December)
- Consider selling losing securities to benefit from the allowable capital loss deduction and to net losses against gains in the same year
· Install qualified energy efficient home improvements or solar equipment
· Submit all charity deductions, even if you are NOT itemizing your deductions
- Consider requesting employer reimbursement now for employee expenses as they are no longer deductible on your personal income taxes
· Remember that travel expenses are now deductible as eligible gambling losses
· Consider shifting income to others that may be in a lower tax bracket
· Consider a ROTH conversion to utilize the wider new income tax brackets
- Consider taking advantage of the ZERO Capital Gains rate by utilizing in full the lowest tax bracket
- Upgrade your QuickBooks if you are a 2018 user. File your corporate and partnership income taxes on time! There are now steep penalties assessed for non-filing of your income taxes.
- Our team is now filing Sales Tax Reports through AZTAXES.GOV as AZ has moved most businesses to an on-line filing requirement. In most cases, we can no longer file paper reports.
- Corporations: Generate your annual meeting minutes and any bylaw changes. IMPORTANT: All Corporations are required to have stock registers/certificates, minutes and bylaws! If you do not have these on file, contact me for a referral source.
- Corporations: File your Arizona Corporation Commission reports on a timely basis. You can sign up for e-mail reminders through their website.
· Accelerate any foreseen equipment, auto and supply purchases into this year
· Consider taking advantage of the Section 179 deduction for vehicle purchases
· Make SEP contributions
· Log in cash expenses for the year
· Document business miles traveled on your mileage logs (see me for a sample)
· Keep better track of expenses for home utilities for businesses operating from home
- Claim up to a maximum of $25 for any valid business gifts given to individuals or businesses
· Delay billing customers in December to defer revenue into January, if possible
· For cash basis businesses, pay all outstanding bills if cash flow allows
· Remember that credit card purchases are deductible in the year the items are purchased
- Make sure you are in compliance with the State Fund mandatory coverage requirements for contractors that do work for you.
- REMINDER: Workers Compensation Insurance is mandatory for all employees with owner/officers being the exception to the rule.
- File payroll and sales tax reports timely and become knowledgeable as to your filing deadlines
- Turn otherwise hobby expenses into legitimate business deductions by converting into and setting up a sole proprietorship
- Review the possibility of claiming a home office deduction under the fairly new SIMPLIFIED METHOD
- REMINDER: Arizona requires all businesses to provide paid sick time for all employees. The minimum is 1 hour of sick time per 30 hours worked.
· Calculate any payroll bonuses or shareholder loan payments
· Sole proprietors-pay children for services rendered to shift income to a lower tax bracket
- Order a current tax table if you are a QuickBooks payroll user (not required if I enter your payroll for you)
- Report new employees to the New Hire Reporting Division (mandatory through the year) THIS HAS BEEN OVERLOOKED BY MANY BUSINESSES.
- Obtain current addresses and taxpayer identification numbers for any 1099 subcontractors, employees and previous employees (for 2020) and enter these into QuickBooks
· Reimburse employee business mileage at .57.5//mile
· Check your files to make sure that valid I-9, W4 and A4 forms exist for every employee
- Make sure you are aware of your required tax deposit and quarterly report deadlines. I have seen excessive penalties again this year relating to late reports that could have been easily avoided. Contact me for a payroll chart if it would be helpful. It definitely helps to make sure you understand the specific payroll filing requirements for your business. I’d love to see these reduced or completely eliminated for next year.
· Consider setting up a small business profit/sharing or retirement plan.
· Consider setting up an HSA (Health Savings Account) for employees.
· Re-evaluate the best business structure for your company under the new Tax Reform Act
· Remember that there is a new 20% QBI deduction for small businesses
Hopefully, I have suggested some items that can be of assistance to you or your business and can possibly help save some money. If you have any questions or comments, don’t hesitate to call.
Lastly, you will periodically be hearing from me throughout tax season as I receive any important tax updates!
Thank you all for your continued support and ongoing trust and business!
Hope to see or hear from you soon ……….
Warmest Regards and Happy Holidays,
Linda & Team
LINDA ROZET, CPA, PC