Top 10 Quick Tips for Your 2020 Taxes
From new deadlines to strategies to make sure you get all the stimulus money you have coming to you, here are some quick tips to keep in mind about your 2020 taxes.
Are dollars, documents and deductions on your mind this month? Even if you trust your tax preparation to a professional, here are some tips that are particularly relevant given the changes that have taken place over the past year. Perhaps some of them are pertinent to you.
- You get an extra month: May 17, 2021, is the new deadline to file your 2020 federal income taxes. "This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic," said IRS Commissioner Chuck Rettig in a news release. "Even with the new deadline, we urge taxpayers to consider filing as soon as possible, especially those who are owed refunds. Filing electronically with direct deposit is the quickest way to get refunds."
- But the deadline for your 2020 state income tax filing may not be the same as the 2020 federal income tax filing deadlines. Check with your state on your exact deadline. For example, Hawaii has a deadline of April 20.
- May 17 is also the new deadline to make 2020 contributions to Roth IRAs, traditional IRAs and health savings accounts (HSAs).
- April 15 continues to be the deadline for making 2021 estimated tax payments for the first quarter of the year.
- If your 2020 income is much lower than 2019 or you've had a child, consider filing your federal income taxes sooner rather than later. Stimulus payments and tax benefits related to the American Rescue Plan (ARP) are based on your most recent return. So, if your 2020 situation is (much) different from 2019, you may be eligible for new benefits.
- If your 2020 income is much higher than 2019 you may want to wait to file your federal taxes until you have your stimulus payment in hand.
- If your 2020 Adjusted Gross Income (AGI) is less than $150,000 and you received unemployment compensation last year, the first $10,200 of your benefit is not taxable on the federal level.
- Even if you take the standard deduction, the 2020 CARES Act allows you to take an above-the-line deduction of $300 for a cash donation to a public charity.
- When collecting details for your income tax return, remember any income you made on the side. While not all money you receive (like gifts of $15,000 or less) is taxable, some often-overlooked side income that does need to be reported includes canceled debt and cash from side gigs.
- Remember the critical "DCDs": Dependents, Credits and Deductions! The IRS defines dependents as "qualifying child" or "qualifying relative." For help determining who qualifies as a dependent, the IRS has an interactive questionnaire. Depending on the type of support you provide these individuals, different credits and deductions may be relevant, especially following the passage of the ARP.
About the Author
Vice President, Private Wealth Adviser, Procyon Partners
Caroline Wetzel CFP®, CDFA®, AWMA®, is a vice president and private wealth adviser at Procyon Private Wealth Partners. She has worked in financial services since 2001 and began specializing in wealth management for affluent multi-generational families in 2015. Caroline earned a B.S. degree in policy analysis and management at Cornell University and an MBA in finance and advanced certification in marketing from the University of Connecticut School of Business.