Tax Planning 2020

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December 8, 2020

As we are still waiting for final approval from the IRS on pending items effecting your 2020 tax returns, below are a few items that have been implemented for the 2020 tax year. We would be happy to review these and any other tax questions or concerns with you. If you wish to schedule a tax planning session with one of our professionals, please contact your NMS Accountant or one of our offices.
 
NMS - Mentor 440-352-3949
NMS - Chardon 440-286-5222
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NMS - Burton 440-834-9686
NMS - Middlefield 440-632-4370
 

SBA PPP Loans

As of right now, the forgiveness of PPP loans will be essentially taxable in 2020, even if the final forgiveness occurs in 2021. The IRS has issued a recent Revenue Ruling to this effect. However, on November 19 top Republicans and Democrats state that the Treasury Department "missed the mark" and feel this should be tax free as intended. They intend to correct this by December 11. We will try to keep you posted.

Charitable Contributions

A universal deduction of $300 for gifts of cash made by individuals to charitable organization during 2020 will be deductible. This applies to all taxpayers including those who do not itemize their deductions. For those taxpayers who do itemize their deductions in 2020, another provision will suspend the 60% AGI limit for cash gifts to public charities. You could deduct up to 100% of your AGI for a cash charitable gift in 2020.

Net Operating Loss Carrybacks

If you have had taxable income/net profit in the last five years, you can now reduce those prior years’ profits with the current year’s loss and possibly receive cash back from the Federal Government. Prior to this COVID provision, you were only allowed to apply these current year Net Operating Losses to future years.

Depreciation Changes

The CARES Act also expanded the federal deductions for depreciation for commercial real property. Bonus deprecation could be permitted for Qualified Improvement Property. This would include improvements made to the interior of commercial real estate.

COVID-Related Expenses

Section 139 deduction could permit you to make tax free payments to employees for certain COVID related expenses. These expenses could be deductible for the Company but avoid taxation to the employee. In addition, the CARES Act allows employers to provide student loan repayment benefits to employees on a tax-free basis.

Sick Pay Credit

The Families First Coronavirus Response Act provided a payroll tax credit equal to 100% for the qualified sick leave wages paid by an employer to the employees under Emergency Paid Sick Leave. Self Employed individuals are eligible for the credit if he/she would have been entitled to Emergency Paid Sick Leave.

Retirement Distributions

The CARES Act will waive the 10% early withdrawal penalties on distributions up to $100,000 from qualified retirement accounts. The distribution must be used for coronavirus-related purposes. The CARES Act also temporarily waives the required minimum distribution rules from IRA’s or qualified retirement plans.
 
There are numerous tax strategies that can be implemented this year that may result in significant tax savings. Please do not hesitate to contact us by phone or email.

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