virtual presentation 2020 2021 tax presentation
TRANSCRIPT
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Virtual Presentation
2020 – 2021 TAX PRESENTATION
Presenters: Marc Rigueur
David Denenberg
www.freeportmerrickrotary.org
Email Contact: [email protected]
Phone Contact: (516) 378-3355
Economic Impact Payments
• The IRS made Economic Impact Payments (EIP) to certain taxpayers as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
• Eligibility for Economic Impact Payment• First Round EIP
• Based on 2018 or 2019 Federal Tax Return
• $1,200 per adult tax payer
• $500 per dependent
• Second Round of EIP
• Based on 2019 Federal Tax Return
• $600 per adult tax payer
• $600 per dependent ch
• How did you receive your EIP• Direct Deposit
• Check my mail
• Debit Card by mail
Economic Impact Payments
• Individuals Not Eligibilible for Economic Impact Payment• The tax code defines "qualifying children" as those who haven't yet hit their
17th birthday. Child dependents who are 17 years old are not able to get a stimulus check.
- Adults who are claimed as dependents on another person's tax return, as is typical with college students, are not able to get a stimulus check.
- Older adults, from seniors to disabled individuals, who are claimed as dependents are also excluded.
Economic Impact Payments• IRS Notice 1444
• Mailed to all who received an EIP
• Shows amount of your EIP
• Keep Notice as part of your tax records
• You are not required to include the EIP in taxable income
• EIPs are technically an advance payment of a new temporary tax credit (Recovery Rebate Credit) that eligible taxpayers can claim on their 2020 return
• The EIP will not reduce your refund or increase the amount of tax liability owed
• Any additional credits for which you are eligible may be claimed on the 2020 income tax filing
Form 1040 U.S. Individual Income Tax Returns
• Filing Status• Single
• Taxpayer remain unmarried or legally separated through divorce as of the end of the year.
• Married Filing Jointly• Taxpayer and Spouse who are married as of the end of the year.• Income, Deductions and credits of both spouses are accounted for in a joint tax return.• Both spouses are responsible for timely filing of tax returns and any tax liabilities owed.
• Married Filing Separately (MFS)• Spouses choose to account for their incomes and deductions on separate tax returns.• Both spouses name and social must appear on each other’s tax returns.• Both spouses must either itemized or take the standard deduction.
• Head of Household (HOH)• There are several required criteria's for this status
• Single, divorced or legally separated
• You have a qualifying dependent
• *Who can be your biological child, stepchild, foster child, sibling, step sibling, half sibling or a descendant of one of the aforementioned relatives*
• You and spouse file separate tax returns
• Your spouse did not live with you during the last six months of the tax year.
• You live with a qualified child
• You Pay more then half of your household expenses
• Qualified Widow(er) (QW)• Allows surviving spouse to file joint tax return in spite of the deceased spouse
• Allowable for two years following the year of spouse’s death
• Surviving spouse cannot re-marry within those two years.
• Surviving spouse must maintain home for at least one dependent child
Tax Rates• Tax year 2020 Marginal rates are
• 10%• 12%• 22%• 24%• 32 %• 35%• 37%.
• Tax Year 2021 Marginal Rates are to be same…
• The income tax marginal rate(s) that affects you as a filer will depend on your filing status and taxable income.
Tax Bracket2020 Tax rate paid on a range of income
Tax RateTaxable Income(Single)
Taxable Income(Married Filing Jointly)
10% Up to $9,875 Up to $19,750
12% $9,876 to $40,125 $19,751 to $80,250
22% $40,126 to $85,525 $80,251 to $171,050
24% $85,526 to $163,300 $171,051 to $326,600
32% $163,301 to $207,350 $326,601 to $414,700
35% $207,351 to $518,400 $414,701 to $622,050
IRS Form W-4
DeductionsStandard Deduction & Exemption
2020 2021
• Single or Married Filing Separately…………………… $12,400 $12,550
• Married Filing Joint or Qualified Widow(er)…….. $24,800 $25,100
• Head of Household………………………………………….. $18,650 $18,800
• Exemption Deduction………………………………………. Suspended thru 2025
Allowance of a Partial above-the-line Deduction for Charitable Contributions
• For Tax Year 2020, the CARES Act permits taxpayers, who do not itemize, an above-the-line deduction of up to $300 for cash contributions to charitable organizations on the tax return, regardless of filing status.
• This provision will adjust in the 2021 tax year to allow Married Taxpayers Filing Jointly an above-the-line deduction of $600.
Deductions• Tuition and Fees Deduction
• The Tuition and Fees Deduction allows eligible taxpayers to deduct up to $4,000 in qualified higher education expenses for themselves, a spouse and dependent children as an above-the-line exclusion from income. This deduction is subject to income limitation.
• Tuition and Fees Deduction cannot be claimed if American Opportunity Tax Credit (AOTC) or Lifetime Learning Tax Credit are claimed for the same student during the same tax year. A taxpayer may claim the Tuition and Fees Deduction and take a qualified 529 plan distribution during the same tax year for the same student, but there is no double-dipping.
• The deduction for tuition and fees expired on December 31, 2020. Currently, this deduction was not extended and cannot be used for the 2021 tax year.
DeductionsItemized Deductions
• For the 2020 tax year medical expenses are limited to 7.5% of the AGI for all taxpayers. The provision will extend to the 2021 tax year.
• State Income and property taxes• limited to $10,000 ($5,000 if Married filing separately)
• Generally, taxpayers can deduct mortgage interest paid during the tax year on the first $1 million of mortgage debt for your primary home or a second home. Houses bought after Dec. 15, 2017, can deduct the interest paid during the year on the first $750,000 of the mortgage principal.
• Charitable contributions are deductible at 100% of your income.
• Other itemized deduction items includes casualty and theft losses in federally declared disaster areas and certain other miscellaneous expenses.
Deductions
• Qualified Business Income Deduction (QBI)• The deduction allows eligible taxpayers to deduct up to 20% of their qualified
business income (QBI), plus 20% of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income.
• Eligible taxpayers are owners and shareholders of sole proprietorships, partnerships, S corporations and some trusts and estates may be eligible for a QBI deduction – also called Section 199A.
• Income earned through a C corporation or by providing services as an employee is not eligible for the deduction.
• The QBI Component is subject to limitations, depending on the taxpayer’s taxable income, that may include the type of trade or business, the amount of W-2 wages paid by the qualified trade or business and the unadjusted basis immediately after acquisition (UBIA) of qualified property held by the trade or business.
Tax Credits• Child Tax Credits
• This tax reduction credit allows up to $2,000 per child. This credit is for the 2020 tax year and will extend to tax year 2021.
• To qualify• a child must have been 16 years old or younger at the end of the tax year for which you
claim the credit. The child must be your own child, a stepchild, or a foster child.
• You can also claim your brother or sister, stepbrother, stepsister. And you can claim descendants of any of these qualifying people—such as your nieces, nephews and grandchildren—if they meet all the other tests.
• Dependent Credit• The $500 non-refundable credit covers dependents who don't qualify for the
child tax credit, such as children who are age 17 and above or dependents who meet the relationship test (such as elderly parents).
Tax Credits
• Dependent Care Credit• Expenses for the care of a qualifying individual or entity to enable you (and
your spouse, if filing a joint return) to work or actively look for work. Generally, you may not take this credit if your filing status is married filing separately.
• The total expenses that you may use to calculate the credit may not be more than $3,000 (for one qualifying individual) or $6,000 (for two or more qualifying individuals).
• If you received dependent care benefits that you exclude or deduct from your income, you must subtract the amount of those benefits from the dollar limit that applies to you.
• A qualifying individual for this credit may be dependent qualifying child who was under age 13 when the care was provided or a dependent who was physically or mentally incapable of self-care and lived with you for more than half of the year.
Tax Credits• Earned Income Tax Credit (EITC)
• A refundable tax credit that provides support for low and moderate-income working individuals and parents with qualifying children. The credit received is a percentage of earned income up to a specific maximum limit. The 2020 tax year limits are;
• $538 with no qualifying children
• Single Filers - $15,820 AGI Limit
• Married Filers - $21,710 AGI Limit
• $3,584 with one qualifying child
• Single Filers - $41,756 AGI Limit
• Married Filers - $47,646 AGI Limit
• $5,920 with two qualifying children
• Single Filers - $47,440 AGI Limit
• Married Filers - $53,330 AGI Limit
• $6,660 with three or more qualifying children
• Single Filers - $50,594 AGI Limit
• Married Filers - $56,844 AGI Limit
Tax Credits
• Earned Income Tax Credit (EITC)• If your earned income was higher in 2019 than in 2020, you can use the 2019
amount to determine your EITC for 2020. This is an IRS EITC Temporary Relief provision provided by the Taxpayer Certainty and Disaster Tax Relief Act of 2020.
Tax CreditsEducation Tax Credits
• American Opportunity Tax Credit (AOTC)• Provides tax credit of up to $2,500 of the cost of tuition, certain required
fees and course materials needed for attendance and paid during the tax year. 40% of the credit for which you qualify that is more than the tax you owe (up to $1,000) can be refunded to you. This credit is subject to income limitation.
• To be eligible to claim the AOTC, the law requires a taxpayer (or a dependent) to have received Form 1098-T, Tuition Statement, from an eligible educational institution.
• Eligibility for the American Opportunity Tax Credit requires a student to have not completed the first four years of post-secondary education, Enrolled in at least one academic semester during the applicable tax year and Maintains at least half-time status in a program leading to a degree or other credential.
• Postgraduate students are not eligible for the AOTC.
Tax Credits
Education Tax Credits
• Lifetime Learning Credit (LLC)• The lifetime learning credit (LLC) is for qualified tuition and related expenses
paid for eligible students enrolled in an eligible educational institution. This credit can help pay for undergraduate, graduate and professional degree courses — including courses to acquire or improve job skills.
• There is no limit on the number of years you can claim the credit. It is worth up to $2,000 per tax return. This credit is subject to income limitation.
• To be eligible to claim the AOTC or LLC, the law requires a taxpayer (or a dependent) to have received Form 1098-T, Tuition Statement PDF, from an eligible educational institution, whether domestic or foreign.
Tax Credit• Recovery Rebate Credit
• Authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the COVID-related Tax Relief Act. It is a tax credit against your 2020 income tax. Generally, this credit will increase the amount of your tax refund or decrease the amount of the tax you owe.
• Individuals who received the full amounts of both Economic Impact Payments do not need to complete any information about the Recovery Rebate Credit on their 2020 tax returns. They already received the full amount of the Recovery Rebate Credit as Economic Impact Payments.
• Eligible individuals who did not receive the full amounts of both Economic Impact Payments may claim the Recovery Rebate Credit upon filing of the 2020 income tax returns.
Preparing for your tax appointment Tips
• Look at last year’s tax return for income and expense reminders.
• Do you claim dependents? Each dependent must have a Social Security number. If you have added a new dependent, your tax preparer will need their full name, social security number, and date of birth. Let your tax preparer know if you are dropping a dependent.
• Gather all your W-2s for both you and your spouse, if married. If you have income from other sources, such as pensions, S Corporation, partnership, estate or trust, make sure you have all your K-1s.
• Make sure you have all the 1099s reporting of various income. Interest and dividend income from banks and investments. If you collected unemployment in 2020, it is taxable. If you collected social security during 2020, the year end benefit statement will be needed.