B.A. Harris Blog

2020 Tax Updates and Year in Review

With 2020 rapidly coming to a close, many of us are eagerly looking forward to 2021 in hopes that less tumultuous times are ahead. While we are all anxious for a better tomorrow, it’s important that we take the time today to look back upon the year and use this opportunity to take advantage of any changes to the tax code that occurred during 2020, and possibly consider a change in our own personal tax strategies.

While there wasn’t the sweeping overhaul to the code like we saw during 2018, there certainly were some changes which merit some consideration before tax season is upon us. We believe the following items will have the largest impact on our clientele for both individuals, and business entities alike:

The Setting Every Community Up for Retirement (SECURE) Act

Passed in December of 2019, the SECURE Act included a number of noteworthy provisions, including:

Individuals

Businesses

  • Credits are now available to help small businesses pay for the start-up and administration costs of implementing a new retirement plan
  • Employers offering 401(k) plans must now offer employees with over 1,000 hours, or 500 hours over the last 3 years, the ability to contribute to the company sponsored plan

The Coronavirus Aid, Relief and Economic Security (CARES) Act

In response to the Coronavirus Pandemic, the CARES Act implemented the following measures to provide taxpayers and businesses some degree of financial relief. Among the most critical are the following:

Individuals

  • Required Minimum Distributions from retirement accounts are not mandatory for 2020.
  • Issuance of $1,200 stimulus checks to qualifying individuals, with an additional $500 per child, subject to phase out, based on the taxpayer’s most recently filed tax return. Please note, if you did not receive your check, the amount you should have received will be treated as a credit on your 2020 return.
  • $300 of charitable cash contributions are now above the line deductions, meaning taxpayers do not have to itemize to deduct up to $300 of cash contributions in 2020.
  • “Qualified individuals” can receive a penalty-free distributions of up to $100,000 from eligible retirement plans, which are not subject to withholding. Although taxable, you have the option of spreading out the tax due over 3 years or if the distribution is repaid within 3 years, you can recover any of those taxes paid so in effect, this becomes a tax-free loan. Click here for the definition of a qualified individual.

Businesses

  • Offered Paycheck Protection Program (PPP) loans, with forgiveness of up to $10 million dollars, to qualifying small businesses to encourage retention of employees. Please note, if you need assistance in applying for your PPP forgiveness, please give us a call and ask for Greg.
  • For those small businesses who did not receive a PPP loan, the Employee Retention Credit is available for small businesses who were fully or partially shut down, or experienced a significant decline in revenue.
  • Bonus depreciation is now allowed on certain improvements to Commercial Real Estate.
  • And, finally, taxpayers planning on buying their first home in the great state of Idaho should be aware of Idaho Code section 63-3022V: Deduction For First-Time Home Buyers, which allows individuals a deduction on their Idaho state taxable income for depositing funds (up to $30,000 a year for married couples) into a designated First-Time Home Buyer Savings Account.

    If you, or anyone you know, have any questions on any of these items, or are interested in any tax planning for the current year and beyond, please contact us at your earliest convenience and we would be happy to speak with you. Happy Holidays!

    Aaron Lavarias, CPA

Ready to chat?
So are we.

Feel free to contact us with any questions or needs you have. We will get in touch with you right away.

CONTACT US
or

Subscribe to our newsletter, and get periodic updates from our blog as well.

Select a professional to schedule a meeting with.

Arla Kester CPA, Partner

Arla Kester

Tyler Nyman CPA, Partner

Tyler Nyman

Karris Kimball CPA, Manager

Karris Kimball

Tara O’Connor CPA, Manager

Tara O’Connor

Greg Stalling CPA, Manager

Greg Stalling