Taxes Next Week, Next Month and Next Year

2021 is coming, dun dun dun….

For some people that is good news, for some people that is like 4 more years of covid.

Here’s some tax buzz to look out for in the coming weeks, months, years.

Next Week – December 31 is coming so contact your CPA today for 2020 year end planning. Here are some general topics to bring up if they apply to you.

• Net Operating Loss “NOL” Section 2303 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), revised the provisions of the Tax Cuts and Jobs Act (TCJA), section 13302, for tax years 2018, 2019, and Taxpayers can carry back NOLs, including non-farm NOLs, arising from tax years beginning in 2018, 2019, and 2020 for 5 years. See section 172(b)(1)(D)(i).
• Did you receive PPP Loans or Grants? Make sure you recorded these transactions correctly and dont pay tax on PPP loans or miss deductions for amounts not forgiven. https://home.treasury.gov/news/press-releases/sm1187
• $5K Employee Retention Credits if you did not receive PPP loans and kept your employees employed. This credit is claimed through your payroll via form 941 Q4 or claimed early on Form 7200 https://www.irs.gov/coronavirus/employee-retention-credit
• Donor Adivsed Funds “DAF” for contribution bunching for instance 5 years of charitable donations into 1 year to accelerate and maximize the tax benefit.
• Retirment Contributions are always nice but remember NO RMD for 2020. If you took out RMD did you return it by August 31, 2020? https://www.irs.gov/pub/irs-drop/n-20-51.pdf

Next Month – Welcome to 2021. It’s January. Tax time usually kicks off after superbowl. By this time you should have your 2020 tax information and ready to schedule your tax appointment. When you are ready, contact your CPA to schedule 2020 tax return preparation and 2021 Q1 tax estimate both due by April 15, 2021.

IMPORTANT: You should be able to produce the following accounting report for 2020 year end by January 31, 2021. If you expect delays please contact your CPA immediately.

• Accounting Reports to your CPA (pdf format) by January 31, 2021
  • Balance Sheet*
  • Profit and Loss*
  • Statement of Cash Flows
    
    * Prior Year Comparative Column with $Change

Next Year – there are some major deadlines in 2021, but more important then ever, if you (will) have accumulated over $1 million in assets (i.e. real estate, closely held business, retirement accounts, savings, etc.) keep reading…

IMPORTANT tax deadlines for 2021:

• January 31, 2021 – Year end
  • W2’s and 1099’s to Recipient/Government
    
• March 15, 2021 – Pass-through entities
  • S-Corp
  • LLC/ Partnership
    
• April 15, 2021 – everyone else
  • C-Corp
  • Trusts
  • Individuals
  • Gift tax
    
• May 15, 2021 – tax exempts
  • Public charities
  • Private foundations
    
• September 15, 2021 – Pass-through extension
  • S-Corp
  • LLC/ Partnership
    
• September 30, 2021 – Fiduciary extension
  • Trusts
    
• October 15, 2021 – everyone else extension
  • C-Corp
  • Individuals
  • Gift tax
    
• November 15, 2021 – tax exempt extension
  • Public charities
  • Private foundations

IMPORTANT: Current estate laws are set to expire at the end of 2025. These expirations will reduce the estate exemption from approx $11m back down to around $5m. As such, about $6m of your wealth will be subject to Federal estate tax at 40% – $2.4m in tax would be due simply because you died after midnight 2025 and didn’t plan for this.

Additionally if the tax laws change even more aggressively under a Biden presidency, then you can expect a bigger tax bill following you into the afterlife.

Make sure to consult your CPA and Trust Attorney ASAP and ask about some of the following estate planning techniques.

• Grantor Trusts – I.D.G.T. “Ijit” – set up during grantor’s (that’s you) lifetime. Very effective for highly appreciated assets such as closely held stock, real estate, IP or art.

• Portability Election – “DSUE” – Utilized at the passing of the first spouse. Even if your estate is below the filing threshold, it can make sense to still file the estate tax return to transfer the decedent spouse’s unused exemption to the surviving spouse. There are complex rules if the surviving spouse remarried after receiving the DSUE.

These are just a few strategies and no doubt everyone has a unique and different tax plan. Feel free to share any comments or ideas.

Make sure to contact your CPA today to talk more about this article and think SMART – Save Money And Reduce Tax.

Reach out with any questions or to talk more about your taxes or business. Info@mrarrachecpa.com