The tax laws change frequently. We want to provide you with tax help and resources to make the process easier to understand. That’s why we’ve prepared a list of tax tips we hope you will find useful!
If you don’t find answers to your questions, please give us a call at (317) 897-9964 or contact us online. One of our tax professionals will be happy to assist you!
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Tips for Filing Your 2020 Taxes
The tax code is complicated and can change dramatically.
Please consult your tax professional for expert advice.
IRS Warning About Email and Phone Scams
The IRS has reported many email and phone scams which claim to be from a collection agency working with the IRS. It is important that you talk to your tax professional if you are contacted before providing any information.
If you receive an email: Don’t reply, click on any links or open any attachments.
If you receive a phone call from someone claiming to be from the IRS: Record their name and badge number, ask for a call back number and make a note of the caller ID if available.
NEW Charitable Contribution Deduction
There is a new $300 charitable contribution for 2020. You can write off up to $300 in cash donations even if you do not itemize deductions.
Indiana Taxpayers Only
- Do you know anyone (including Grandparents) that are saving or paying for College Expenses or Private School K-12 Tuition? Contribute to the Indiana College Choice Direct Savings Plan and receive a Tax Credit of 20% of your contributions up to a maximum of $1,000. Ask us for details.
- Don’t forget, Indiana allows you to deduct the first $3,000 you paid in rent and the first $2,500 of property taxes.
- Good News – it is not taxable income.
- Also, there are six ways to Get More Stimulus Payments when you file your 2020 tax return in 2021. It’s call the Recovery Rebate. Ask us for details.
- The bad news: you could owe Federal, State and Local taxes on any unemployment benefits you collected, including the temporary $600 weekly boost.
Standard Deduction vs. Itemized Deductions
- Itemized deductions must exceed the standard deductions of $24,800 for Married filing Joint returns, $18,650 for Head of Household, and $12,400 for Single taxpayers.
- You might benefit from itemizing if you had large, out-of-pocket medical expenses, paid mortgage and real estate taxes on your home, made large contributions.
ROTH vs Traditional IRA: Which is Better for You?
ROTH IRAs tend to get a lot of hype, and for good reason, because you pay the taxes upfront and your eventual withdrawals are completely Tax-free.
Traditional IRAs give you a tax break now and, in many situations, will put more money in your pocket than a ROTH would.
The tradeoff is an uncertain future tax liability possibly even decades from now. Given enough time and/or a high rate of return, you may be better off with a ROTH.
Earned Income Credit (EIC)
The Earned Income Credit was passed in 1975 in an effort to reduce poverty and assist those who work to provide for their families but earn lower income levels. The credit decreases the amount of tax you owe and the credit is refundable. The maximum amount of credit for 2020 is:
– $6,600 with three children
– $5,920 for two
– $3,584 for one child
– $538 for no children
– Also, the Indiana maximum credit is $575
The American Opportunity Credit can increase your refund by up to $2,500 per student. Also, you could qualify for a $1,000 refund even if you had zero income, but you cannot claim it if you could be a dependent of your parents. The tax break is allowed the year you pay the tuition even if you used a student loan to pay for it. Form 1098T is required.
Child Tax Credit
- The tax credit is $2,000 per child under the age of 17, and the income phase-out is higher.
- There is also a $500 tax credit for dependent children over age 17 and all other dependents.
- The deduction for Student Loan Interest can ease the burden of payments for student loans. If you pay interest on a qualified Student Loan, you are generally able to deduct the interest expense up to $2,500.
- Discharged loans are generally treated as added income. However, there are now exclusions for: Death, Permanent Disability, and working for a certain period of time in specific professions.
Make the RMD from Your Traditional IRA Tax-Free
- The tax code allows you to donate directly from your IRA account up to $100,000 per year in Qualified Charitable Distributions (QCDs).
- The QCD donated money escapes Federal income taxes and will also lower your Indiana and county taxes by over 5% of the contributed amount.
- Double-Dip. You get a double-dip when you itemize deductions. The non-itemizing taxpayer creates a deduction where none existed before.
- Other benefits may include: Lower Medicare premiums and lower tax on your Social Security benefits.
There is a $250 deduction for teachers spending their own money for classroom supplies.
Business Deductions for Sole Proprietorships, S Corporations, Partnerships and, maybe, Rental Income
- Qualified Business Deduction (QBD). Generally you can deduct 20% of profit from your income.
- Standard Mileage Rates.
The 2020 rate for business use of your vehicle is 57.5¢ a mile for the entire year. It’s extremely important to have a mileage log or all deductions could be disallowed.
- No Entertainment expenses are deductible for 2020.
- Business meals and Client Prospect Meals are 50% deductible. The expense must be ordinary and necessary. You must keep track of your business meals all year long so you have the proof you need for the deduction. Keep the receipt that shows the name of the restaurant, the name of the people at the table and a record of the reason for the meal.
Need a Copy of Your Tax Return?
The Internal Revenue Service charges $50 for a complete copy of your tax return. However, Fiscal Tax retains our client returns for 10 years and we are available year-round to provide FREE copies whenever you should need them.
Download the full PDF.