With year-end approaching and the unsettled situation in Washington, DC, it is important to evaluate your tax status in a proactive way for the tax year 2020.
Given the uncertainty of the impact, the election result will have on taxes, consulting a tax professional for income tax planning is even more important. The candidates have vastly different tax proposals. On one hand, the Tax Cuts and Jobs Act of 2017 (TCJA) would be reexamined and in some cases repealed, and on the other, the TCJA would be made permanent.
In addition to the uncertainty, the tax law remains complex under either scenario. Some examples of the significant tax planning complexities involve the laws: 1) affecting deductions and credits depending on adjusted gross income (AGI); 2) imposing additional taxes at higher levels of AGI, such as the net investment income tax; 3) imposing Alternate Minimum Tax; and 4) allowing for net operating losses to be carried back to older years and generate refunds that were previously unavailable.
Unless you proactively analyze your 2020 income tax situation now, you risk missing out on an opportunity to take advantage of available tax breaks. Planning can help take advantage of the Qualified Business Income deduction, maximize your retirement savings, maximize refundable credits that are paid to you regardless of what you have paid in, and take advantage of lower tax brackets, to name a few.
Recent laws have provided new tax breaks such as:
Other new challenges and opportunities this year are the many COVID-19 related programs such as the Small Business Administration (SBA) Grants, SBA Economic Injury Disaster Loans (EIDLs), SBA Paycheck Protection Program (PPP) Loans, Payroll Retention Credit, Payroll Delayed Deposit Program, revised Sick Pay regulations, and revised Family Medical Leave Act regulations. The IRS continues releasing guidance on important tax provisions related to these programs; however, some provisions still need clarification by Congress. We continue to monitor both the IRS and Congressional pronouncements for updates on how your situation is affected.
Your income tax planning strategy will depend on your circumstances. Some year-end planning ideas include:
These are only some of the income tax planning opportunities available. The tax planning strategy best for you depends on your tax facts and circumstances. We advise you to consult a qualified tax professional before taking any tax planning actions.
Your tax savings will be directly related to the accuracy and sufficiency of the information provided for projection purposes. We look forward to assisting you in your 2020 year-end income tax planning strategy.
If you have any questions, or wish to set-up an appointment, please contact our office at 410-862-2673 to talk with one of our tax professionals today.