We get another month this year to get our taxes done. Both the federal and state filing deadlines are now May 17. That’s welcome news for many — the pandemic made 2020 an unusual and challenging financial year, and many of you have questions.
We collected some on Twitter and enlisted Jerry Lee of Lee Financial Group in Wayzata to answer them. You’ll find his answers below.
Indeed, we do have a little bit more time to file our returns, which is fantastic. And the state of Minnesota has gone ahead and adopted that methodology with the feds. [But one thing we] want to be aware of is that there was not a change in estimated tax due dates as of yet, even though there was a bill introduced in Congress to push that back. Typically the estimated tax first payment is due on April 15.
Yes, absolutely right. There are a lot of individuals who have sole proprietorships, single member LLCs, or who may be engaged in partnerships or S corporations, where the actual taxation of those entities and those businesses flow to the individual tax return. So it’s a good idea to make those estimated tax payments — to pay as you go, if you will — on a quarterly basis.
The feds have decided the first $10,200 is going to be non-taxable for those individuals who have adjusted gross incomes of $150,000 or less. If you’re married, that doubles and goes to $20,400.
The challenge we have within Minnesota is that the state, as of yet, has not reached a conclusion in terms of passing a bill to also exclude that unemployment, which could affect not only your income taxes, but also your potentially your property tax rebate.
You will get a document from the state which will define exactly how much you had in unemployment paid and what you had withheld for federal and state taxes.
There is going to be an additional worksheet that has been added to the income tax instructions. It should not be too challenging for those who wish to take it on themselves. Most that do take it on themselves will buy some sort of off-the-shelf software, which should have made those adjustments by now.
It is important that we try to keep track of those payments that we’ve had. They are not taxable. But if you did not receive your stimulus payment, it’s important that you record and recognize that on your tax return so that your tax refund can be adjusted accordingly.
We do need to report how much you did receive, so that the Internal Revenue Service doesn’t double dip, in terms of giving you an additional amount because you failed to report how much you did receive.
Correct. So there was a document that you would have received early on in the year, when you got your economic payment. It was an IRS Notice 144.
We suggest that you engage in a hack, if you can’t really remember the amount. If you go to the IRS website, enter in your information and it will tell you approximately when the payment was sent to you. And then you might go to your bank statement or bank account and kind of check around that date and determine the exact amount.
The best place to go would be irs.gov. They have a wonderful website. It is user-friendly, for the most part. For the state of Minnesota, we have the Minnesota Department of Revenue, which is a great website. In addition, you could go to the Minnesota Society of CPAs site, as well as the AICPA site.
The one thing that people may be concerned about is if they filed their return and they claim the unemployment income on the return. The IRS has made a statement that says that they will correct those returns and adjust them accordingly.
If you’ve gone ahead and filed and identified that you’d like pay taxes owed on April 15, and now we have until May 17, you can contact the Internal Revenue Service and make that adjustment so that they can change the withdrawal date.
That has been an ongoing challenge for individuals. The fact is, is that as an individual, there used to be the thing called unreimbursed employee business deductions. The federal government has done away with that with the American Jobs Act, and so now that’s not an opportunity for people.
However, Minnesota does allow employee business deductions to be taken on your individual tax return. So it may not be available for federal, but it could be available for Minnesota. The challenge is, you must meet a threshold in order to actually get a single dollar of deduction. So it’d be very important to to review the instructions and talk with a professional, possibly.
Well, anyone who was impacted by COVID-19 and actually took a distribution from a retirement plan, there is a special exclusion that the federal government did make people aware of.
There is also the new question, did you engage in any virtual currency transactions?
And then, also the ability for people to have a deduction of $300 for charitable contributions, even if you do not itemize your tax return.
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