News & Updates for You
Here is what you can find in the most recent newsletter!
- President Trump's Payroll Tax Deferral
- Upcoming Extension Deadlines
- New Tax Rules for 2020
- Pandemic Tax Surprises
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President Trump's Payroll Tax Break
On August 8th, President Trump signed an executive order for a deferral of the employees' portion of the payroll tax from September 1st through the end of the year for workers making less than $4,000 for any bi-weekly pay period.
Per the Internal Revenue Services' information on the tax deferral employers are not required to participate in the tax holiday or offer it to employees. The tax holiday is an executive order which only defers payroll taxes and doesn't eliminate them. This means that the taxes will have to be withheld and paid ratably from paychecks issued between January 1, 2021 and April 30,2021. Employers could potentially be on the hook for these taxes if they aren't collected from the employee.
Given these circumstances we are suggesting that employers do not participate in this plan.
New Tax Rules for 2020
Here are several new tax laws passed this year to consider as you start planning your 2020 tax obligation.
- Make up to $300 of charitable contributions: For the 2020 tax year only, an above-the-line deduction of $300 is available to all Americans who want to make a charitable contribution. This deduction is available even if you take the larger standard deduction.
- Donate up to 100% of your income: The normal contribution limit of 60% of your income is suspended for 2020, allowing you to contribute as much of your income as you want to various charities.
- Use retirement savings to pay for birth or adoption expenses: Adding a child to your family is very expensive. To help with these costs, you can now cash out up to $5,000 per parent from your retirement accounts to pay for birth and/or adoption expenses. While the withdrawal won't be hit with the 10% early withdrawal penalty, you'll still have to pay income taxes.
- No age limit for contributing to IRAs: You can now contribute to an IRA regardless of your age as long as you have earned income. The IRA contribution limit for 2020 is $6,000 if you are under age 50 and $7,000 if you're over age 50.
Pandemic Tax Surprises
Numerous new laws provide economic relief to individuals and businesses hardest hit by this year’s pandemic. Here are three potential surprises if you use the available economic relief packages:
- Getting a tax bill for unemployment benefits: While the $1,200 economic impact payments most Americans received does not have to be reported as taxable income on your 2020 tax return, there is currently no such luck with unemployment benefits. In addition to paying federal taxes on your unemployment compensation, more than half of states also impose a tax on unemployment benefits.
- Paying estimated tax payments: If you normally receive a paycheck from your employer, you may have never needed to write a check to the IRS to pay estimated future taxes. Your employer withholds your taxes from your paychecks and sends it to the IRS for you. If you’re collecting unemployment benefits, however, you may be required to pay tax on the unemployment benefits received during the first six months of 2020 by July 15, 2020.
- Reporting emergency distributions from retirement accounts: You may withdraw up to $100,000 in 2020 from various retirement accounts to help cover pandemic-related emergency expenses without incurring penalties. While you will not be required to pay an early withdrawal penalty, you will still be subject to income tax when filing your 2020 tax return.