What Is That?

Tax Issues/Form Changes 2020

WRITER Rose P. Speece North Iredell Records, Inc.

COVID-19 has caused widespread economic devastation across the country including legislative and executive responses to the 2020 Coronavirus. The last executive action by President Trump was on August 8, 2020. Here is a list of legislation passed in 2020: Beginning with March 6, 2020 –Coronavirus Preparedness and Response Supplemental Appropriations Act 2020; March 18, 2020 Families First Coronavirus Response Act; March 27, 2020 —Coronavirus Aid, Relief, and Economic Security CARES Act; April 24, 2020 –Paycheck Protection Program and Health Care Enhancement Act; June 5, 2020- Paycheck Protection Program Flexibility Act of 2020. Then the IRS issued relief for tax filing to be extended for regular filing until July 15, 2020.

There is going to be changes to our tax system for individual and business filers. In January we must file W-2’s, 1099’s, 1099R’s, and the new Form 1099 – NEC (Non-Employee Compensation) along with 941, 942, 943, and 940 employment taxes. There are several tax credit and tax relief issues to COVID-19 relating to these forms. The new Form 1099-NEC for Nonemployee Compensation is for reporting services performed by someone who is not your employee (including parts and materials) in (box 1) that made at least $600. Do not use Form 1099 Miscellaneous for these services.

Regular e-file (electronically file) season to likely begin anywhere between January 15 and February 1, 2021 for returns due by April 15, 2021. Farmer’s don’t have to pay estimated taxes if they file by March 1, if farming is their primary income. All Partnerships and S-Corps must be filed by March 15, giving K-1’s to the owners so they may file their 1040 individual tax returns; C-Corporations are due April 15, 2021. Again, you may elect to file extensions for each type of return to ensure you gather information to file a complete and accurate return.

The Draft Form 1040, US Individual Income Tax Return was

released on August 18. This is a proposed draft, not to be filed, but to give you a preliminary view of changes for tax year 2020. Here is a list of some changes. The first change from 2019 tax form is the virtual currency question. It has been moved from the top of Schedule 1, to page 1 Form 1040 just above the Standard Deduction. The cryptocurrency compliance measure for taxpayers was introduced in 2019 in the form of a checkbox and is important that you answer that question.

Standard Deductions and Dependents. This section remains mostly the same.

Charitable contributions. Typically, we have not been able to reference charitable contributions until Schedule A. However, due to the Cares Act, charitable cash contributions of up to $300 are temporarily above-the-line deductions, on Line 10b. That means you do not have to itemize to claim those deductions - something that because of the increased standard deduction under the Tax Cuts and Jobs Act (TCJA).

Income items. Tentatively another line item could be added to the front, for undetermined taxable income.

Tax, Credits, and Deductions. Page two, line 16 of your Form 1040—where you figure your tax, withholding, and what you actually owe (or are due a refund) is where many changes are for 2020. Line 25 (a-b-c-d) is divided into separate lines for "Federal income tax withheld from Forms W-2, 1099” and "other." Self-employed and gig workers (independent contractors, on-call workers and temporary workers).

Stimulus Checks. Line 30 on the draft form, is “Recovery rebate credit, “would likely be used to claim EIP amounts still owed as a result of a decrease in income or additional dependents after the August 18 release of the form. That includes supplemental $500 EIPs meant for dependents of taxpayers who were told to wait until they filed their tax returns in 2021. There is a separate reconciliation schedule that will carry over to page two of your Form 1040. More to come on instructions, but those instructions are not out just yet.

Refunds. Outside of some renumbering, the refund sections have not changed.

Amount You Owe. Usually, figuring the amount you owe is pretty simple: it is tax due less credits and payments. But there is a new line for 2020, line 37 which notes: Schedule H and Schedule SE filers, line 37 may not represent all of the taxes you owe for 2020. See Schedule 3, line 12e, and its instructions for details. And yes, Schedule 3, line 12e, is new. It says: Deferral for certain Schedule H or SE filers (see instructions), What is that deferral? Under the CARES Act, employers may defer the deposit and payment of the employer's portion of Social Security taxes. The deferral applies to deposits and payments of the employer's share of Social Security tax that would otherwise be required to be made during the period beginning on March 27, 2020, and ending December 31, 2020, with half being due on December 31, 2021, and the remainder due on December 31, 2022. What does that have to do with Form 1040? The relief also applies to self-employed persons. Please read all section and questions, because it will be complicated, not less.

A cautionary note: This is information from a draft form, and not yet approved as the real thing. The IRS reminds us, "Do not file draft forms and do not rely on draft forms, instructions, and publications for filing." The IRS cautions that "unexpected issues occasionally arise, or legislation is passed" which means this form could look a lot different in the final version than it does now. Things could change—and if we have learned anything from 2020, it is that they probably will. Join us at Talley’s Flower Shop on Saturday morning November 3rd from 9 to noon.

Barbara will be there signing copies of our Yadkin Valley Magazine Cookbooks.

We’ll have special give-away prizes too!

Talley’s Open House is Friday November 6 • 9-5 Friday November 7 • 9-3

Talley’s Flower Shop 322 South Main Street, King 336-983-9256

Left to right: Whitney Barker, Zeth Davidson, Steven Howard, Chris Barker, Rose Speece NORTH IREDELL RECORDS, INC. Accounting, Tax Preparation & Bookkeeping PO Box 40 • 152 Indian Hill Rd. Union Grove, NC 28689

Rose P. Speece Enrolled Agent, ATA, ATP

WE OFFER ELECTRONIC TAX FILING

Enrolled to Practice Before the Internal Revenue Service

OPEN YEAR ROUND January 1st thru April 30 MondayFriday 8am9pm Saturday 8am5pm Special Appointments Available May thru December MondayFriday 8am4pm

Telephone: (704) 5394715 Mobile: (704) 4508593 Fax : (704) 5394842 Email: rspeece@yadtel.net