October 15 Target Date Techniques For Taxpayers Seeking Extensions For 2020 Tax Returns

The Internal Revenue Service today reminds taxpayers about the upcoming October 15 due date to file 2020 tax returns. People who asked for an extension should file on or before the extension deadline to avoid the penalty for filing late. Electronic filing options, such as IRS Free File, are still available.

Although October 15 is the last day for most people to file, some taxpayers may have more time. They include:

• Members of the military and others serving in a combat zone. They typically have 180 days after they leave the combat zone to file returns and pay any taxes due.

• Taxpayers in federally declared disaster areas who already had valid extensions. For details, see the disaster relief page on IRS.gov.

• Electronic payment options are the optimal way to make a tax payment.

• They can pay when they file electronically using tax software online. If using a tax preparer, taxpayers should ask the preparer to make the tax payment through an electronic funds withdrawal from a bank account.

• IRS Direct Pay allows taxpayers to pay online directly from a checking or savings account for free, and to schedule payments up to 365 days in advance.

• Choices to pay with a credit card, debit card or digital wallet option are available through a payment processor. The payment processor, not the IRS, charges a fee for this service.

• The IRS2Go app provides the mobile-friendly payment options, including Direct Pay and debit or credit card payments on mobile devices.

• The Electronic Federal Tax Payment System (EFTPS) is convenient, safe and easy. Choose to pay online or by phone by using the EFTPS Voice Response System.

There is usually no penalty for failure to file if the taxpayer is due a refund. However, people who wait too long to file and claim a refund, risk losing it altogether. Those who have yet to file a 2020 tax return, owe tax, and did not request an extension can generally avoid additional penalties and interest by filing the return as soon as possible and paying any taxes owed.

Taxpayers can file now and schedule their federal tax payments up to the October 15 due date. They can pay online, by phone or with their mobile device and the IRS2Go app. When paying federal taxes electronically taxpayers should remember:

Your Tax Pro on Demand, 

R Clyde Olivieri, Jr.

P.S.  Should you believe to have fallen into a situation related to this issue and know not what to do, or how to handle your specific matter, call us now, at 215.550.3636, from 1000am until 1000pm, Monday through Sunday.  We will come up with solutions or suggestions, related to your potential tax consequences. We have convenient evening and weekend appointment hours.

Are You Maximizing The Cash Impact Of 2020 Net Operating Losses?

The past 18-month stretch has been challenging with health, social, and financial turmoil seeming to come daily. As many are looking forward to the future, they are also excited to finalize their 2020 individual federal income tax filings by October 15th and put 2020 in the rear-view window.  

Call the "Tax Pros on Demand" now at 215.550.3636, from 1000am to 1000pm, Monday through Sunday, should you have any questions on this or any other subject matters related to your business's or your individual income tax returns.

But before any 2020 individual income tax returns are signed, careful consideration should be given on how best to maximize net operating loss (”NOL”) cash benefits. Taxpayers can also consider optimization of 2018 and 2019 NOLs as well, given the taxpayer friendly guidance issued by the IRS in Revenue Procedure 2020-24.

Many businesses have seen the creation of federal NOL’s in 2020 due to the majority of stimulus funding not being taxable, while the associated expenses were still allowed as a deduction.  This tax treatment mismatch,  coupled with the negative business impact of COVID in 2020, allowed for more NOLs to be reported for the 2020 taxable year than normal. 

Call the "Tax Pros on Demand" now at 215.550.3636, from 1000am to 1000pm, Monday through Sunday, should you have any questions on this or any other subject matters related to your business's or your individual income tax returns.

In general, NOLs created in 2018, 2019, and 2020 are required to be carried back five years and then carried forward indefinitely. So, what’s the big deal? Isn’t it better to carry back the NOL and get the cash refund now as opposed to waiting to carry the loss forward to a future taxable year? 

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Just like everything in the tax world, it depends. With new 2022 tax legislation looming, and the potential for federal individual income tax bills to skyrocket, taking the time to forecast a future benefit of carrying forward an NOL could result in significant tax savings. 

So how do individuals maximize the cash benefit of 2018, 2019, and 2020 NOLs? Two important questions need to be asked:

1.      What is the owner’s individual federal income effective tax rate for the carryback years versus the expected rate in future years?

2.      What is the owner’s current cash position? Is the need for cash imminent or is there an option to postpone the cash collection to maximize the benefit?

Your Tax Pro on Demand, 

R Clyde Olivieri, Jr.

P.S.  Should you believe to have fallen into a situation related to this issue and know not what to do, or how to handle your specific matter, call us now, at 215.550.3636, from 1000am until 1000pm, Monday through Sunday.  We will come up with solutions or suggestions, related to your potential tax consequences. We have convenient evening and weekend appointment hours.

Taxpayer Certainty and Disaster Tax Relief Act of 2020

The Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted last December, provides several provisions to help individuals and businesses who give to charity. The new law generally extends through the end of 2021 four temporary tax changes ...

 

The Internal Revenue Service says newly-expanded tax benefits can help both individuals and businesses give to charity before the end of this year.

Call the "Tax Pros on Demand" now at 215.550.3636, from 1000am to 1000pm, Monday through Sunday, should you have any questions on this or any other subject matters related to your business's or your individual income tax returns.

The Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted last December, provides several provisions to help individuals and businesses who give to charity. The new law generally extends through the end of 2021 four temporary tax changes originally enacted by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Here is a rundown of these changes.

Deduction for individuals who don’t itemize; cash donations up to $600 qualify

Ordinarily, individuals who elect to take the standard deduction cannot claim a deduction for their charitable contributions. The law now permits these individuals to claim a limited deduction on their 2021 federal income tax returns for cash contributions made to certain qualifying charitable organizations. Nearly nine in 10 taxpayers now take the standard deduction and could potentially qualify to claim a limited deduction for cash contributions.

 

Call the "Tax Pros on Demand" now at 215.550.3636, from 1000am to 1000pm, Monday through Sunday, should you have any questions on this or any other subject matters related to your business's or your individual income tax returns.

 

These individuals, including married individuals filing separate returns, can claim a deduction of up to $300 for cash contributions made to qualifying charities during 2021. The maximum deduction is increased to $600 for married individuals filing joint returns.

 

Cash contributions to most charitable organizations qualify. However, cash contributions made either to supporting organizations or to establish or maintain a donor advised fund do not qualify. Cash contributions carried forward from prior years do not qualify, nor do cash contributions to most private foundations and most cash contributions to charitable remainder trusts. 

 

In general, a donor-advised fund is a fund or account maintained by a charity in which a donor can, because of being a donor, advise the fund on how to distribute or invest amounts contributed by the donor and held in the fund. A supporting organization is a charity that carries out its exempt purposes by supporting other exempt organizations, usually other public charities. See Publication 526 for more information on the types of organizations that qualify.

Call the "Tax Pros on Demand" now at 215.550.3636, from 1000am to 1000pm, Monday through Sunday, should you have any questions on this or any other subject matters related to your business's or your individual income tax returns.

 

Cash contributions include those made by check, credit card or debit card as well as amounts incurred by an individual for un-reimbursed out-of-pocket expenses in connection with the individual’s volunteer services to a qualifying charitable organization. Cash contributions don’t include the value of volunteer services, securities, household items or other property. 100% limit on eligible cash contributions made by those who itemize in 2021

Subject to certain limits, individuals who itemize may generally claim a deduction for charitable contributions made to qualifying charitable organizations. 

 

These limits typically range from 20% to 60% of adjusted gross income (AGI) and vary by the type of contribution and type of charitable organization. For example, a cash contribution made by an individual to a qualifying public charity is generally limited to 60% of the individual’s AGI. Excess contributions may be carried forward for up to five tax years.

Call the "Tax Pros on Demand" now at 215.550.3636, from 1000am to 1000pm, Monday through Sunday, should you have any questions on this or any other subject matters related to your business's or your individual income tax returns.

 

The law now permits electing individuals to apply an increased limit (“Increased Individual Limit”), up to 100% of their AGI, for qualified contributions made during calendar-year 2021. Qualified contributions are contributions made in cash to qualifying charitable organizations.

As with the new limited deduction for those who do not itemize, cash contributions to most charitable organizations qualify, but, cash contributions made either to supporting organizations or to establish or maintain a donor advised fund, do not. Nor do cash contributions to private foundations and most cash contributions to charitable remainder trusts

 

Call the "Tax Pros on Demand" now at 215.550.3636, from 1000am to 1000pm, Monday through Sunday, should you have any questions on this or any other subject matters related to your business's or your individual income tax returns.

 

Unless an individual makes the election for any given qualified cash contribution, the usual percentage limit applies. Keep in mind that an individual’s other allowed charitable contribution deductions reduce the maximum amount allowed under this election. Eligible individuals must take their elections with their 2021 Form 1040 or Form 1040-SR.

 

Your Tax Pro on Demand, 

 

R Clyde Olivieri, Jr.

P.S.  Should you believe to have fallen into a situation related to this issue and know not what to do, or how to handle your specific matter, call us now, at 215.550.3636, from 1000am until 1000pm, Monday through Sunday.  We will come up with solutions or suggestions, related to your potential tax consequences. We have convenient evening and weekend appointment hours.