Important Tax Return Reminders

Important Tax Return Reminders for the upcoming deadline

With all that has happened in 2020 you may ask if there anything you need to be aware of when filing your taxes for 2020? Is there anything that might be different? The short answer is yes. There are a few items that retirees should be reminded when filing.

1) An IRS extended deadline

2) waived 2020 RMD’s

3) Charitable donation write offs

4) and stimulus checks.

Extended Deadline

Due to the ongoing pandemic, the IRS has made the decision to extend the 2020 individual tax filing deadline. The deadline is now May 17th 2021. Individuals can also delay federal income tax payments till May 17th 2021 for the 2020 tax year without penalty or interest. The same is true for the NYS tax return. Most other states have matched the federal filing deadline, but if you do not live in NYS, you can use the link here to check with your state tax agency.

Waived Required Minimum Distributions (RMD’s)

As a result of the Cares Act, RMD’s were waived for 2020. This was helpful for many retirees for a few different reasons. For one, it allowed retirees to keep their assets invested, which would give them time to recover from early 2020 losses. Waiving the RMD also helped save on taxable income in 2020, which meant potentially lower taxable Social Security and possibility lower Medicare premiums. It also provided an opportunity for some retirees to convert assets from a traditional IRA to a Roth IRA.

If you did take your RMD in 2020, the IRS allowed you to “put it back” in 2020. This can lead to some confusion as the custodian’s year end 1099-R might only show the distribution and not the amount “put back”. When filing your taxes, make sure you mention to your accountant if your 2020 RMD was returned to its original account.

Charitable Donations

With the recent passage of the CARES Act in 2020, the IRS has allowed taxpayers to deduct up to $300 of charitable donations without itemizing deductions. This amount is $300 for all filing statuses, so unfortunately it is not $600 for married filing jointly filers (although this has changed for tax year 2021). Charitable donations are usually an itemized deduction, but the CARES Act allowed filers to take it above-the-line. This means you can take the standard deduction and still receive a charitable deduction. For a married couple in the 24% tax bracket, this could save them around $72 on their tax bill.

If a retiree does itemize, they are allowed to deduct up to 100% of any cash contributions up to their adjusted gross income. This limit is usually 60%. Unfortunately, any donation to a donor advised fund does not count towards this.

Stimulus checks

The stimulus checks, also known as the Recovery Rebate, were an advanced 2020 tax credit sent to all individuals who qualified. The checks were in the amount of $1,200 in spring 2020 and then another $600 in December 2020 if you were eligible for the full payment. If you did receive this amount, it will not be included in your taxable income. The check is tax-free. If you did qualify and haven’t received the amount you are entitled to, then you are eligible for the rebate when you do file your taxes. This can also be used to offset any taxes owed. You will get your eligible amount once you get your tax refund back.

While these few tax related items will probably be taken care of by your tax professional, it’s important to know what might have slightly changed your financial picture in 2020. Level Financial Advisors is here to help answer any questions you might have regarding your financial picture.

Robert Decker
Financial Planning Associate


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