• Rosanna Bell, PLLC

Client Update: 2020 Income Tax Returns

It will be our pleasure to assist you with the preparation of your 2020 INCOME TAX RETURNS. We would like to take this opportunity to extend our appreciation for the confidence you have shown to our firm by your continued patronage and recommendations. If you find it convenient and prefer to mail your tax information to us, please do so to the above Pleasantville address. Mailing your information will be as efficient and more economical for you. Please feel free to follow up with any questions.


Our tax season hours are 9:00 a.m. to 6:00 p.m. during the week, and will be held in our Pleasantville office. Saturday appointments will be held in Pleasantville from 9:00 a.m. to 4:00 p.m. Appointments will begin Thursday February 4, 2021 through Thursday April 8, 2021. If you would like to schedule an appointment, kindly call our office at (914) 741-5555. Although you may not have received all the necessary documents, appointments may be scheduled immediately. If you are missing any information at your appointment you may submit it later. When preparing for your appointment, please remember the following:

  • Please be sure to bring evidence of all your income items, such as W-2's, 1099's, K-1's, etc.

  • If you are a new client, please bring copies of your last two years' tax returns.

  • Please bring social security numbers and dates of birth for all children and all other dependents. Failure to list the number may result in a $50 penalty.

  • The income tax rates for the year 2020 are 10% - 37%.

  • If you have purchased a new home, boat, any other real estate or refinanced, please bring all the closing documents.

  • Please bring evidence of your health insurance coverage. A premium tax credit may apply if your health insurance is purchased through the market place.

  • Please bring a copy of the front and back of everyone's driver's license.

Finally, upon receipt of your completed returns, be sure to carefully review them. Please notify us of any errors or omissions and we will correct them immediately. Sincerely,

Rosanna Bell, CPA, PLLC


Payment Policy: Payment is appreciated at the time of the appointment. This will allow us to keep any increase if necessary to a minimum. We accept all major credit cards. There will be an additional charge of $30.00 to receive both a paper copy and an emailed copy of your return. There will be an additional $50.00 charge to copy and return the information used to prepare your return. Parking information: The meters on Wheeler Avenue are 75 cents for one hour only. You may not feed the meter. There is a three-hour parking lot with meters located off of Bedford Road. To get to this lot, drive past our office and make a left at the light (Bedford Road), first left into the municipal parking lot before the church. Do not park in the first few spots, as they are 15 minutes. If you park toward the end you can walk down between the buildings and our office is directly across the street. Please feel free to call our office for directions.

The following list of deductions, credits, and income items will be of assistance to you when you are gathering the information necessary to prepare your 2020 Income Tax Returns.

Deductions


Contributions of cash and property to qualified charities. Cash and check contributions to a charity require a bank record, receipt or letter. Contributions of $250 or more require a written receipt from the organization to substantiate the donation. All non-cash contributions in excess of $500 require a receipt, with a complete description of the donation. All non-cash contributions over $5,000 require an appraisal. In addition, individuals who use their passenger autos in volunteer work for qualified charities can deduct 14 cents per mile. Taxpayers may also deduct other cash expenses incurred on behalf of a charitable organization.

Donated automobiles, boats and airplanes valued at over $500 are limited to the charity’s selling price. Be sure to obtain form 1098C from the charity, which must be attached to your return.

Up to $300 in cash contributions may be deductible if you take the standard deduction.


Interest paid on mortgages may be partially or fully deductible. Please bring closing statements on any new mortgages. Interest on Home Equity loans is no longer deductible. However it may be deductible on your state return.

Interest paid on student loans – up to $2,500 is deductible. Restrictions apply.


A taxpayer’s own education expenses may qualify to be deducted as a business expense if the education maintains or improves the taxpayers skills required in the taxpayers employment.This deduction is no longer allowed on your Federal return. However, it may be deductible on your State return.


Taxes paid on local real estate, personal property, state and local income taxes. Please bring your canceled checks for all Federal and State estimated taxes paid. Taxes are limited to $10,000 on single and joint returns and $5,000 on married filing separate returns. This deduction may not be limited on your state return.


Medical Expenses including doctors, dentists, hospitals and travel at 17 cents per mile, plus parking fees, tolls, drugs and medical insurance premiums, if the total exceeds 10% of Adjusted Gross Income. The premiums for Long Term Insurance contracts may also be deductible. Restrictions apply.


Casualty Losses (in excess of $100 per occurrence), such as auto accidents, theft, and storm damage, which exceed 10% of Adjusted Gross Income. This deduction is no longer allowed on your Federal return with the exception being casualty losses suffered in a federal disaster area. However, it may be deductible on your State return.


Alimony- Please bring your ex-spouse's social security number. Post 2018 agreements alimony is not deductible.


Moving expenses- This deduction is no longer allowed on your Federal return. However, it may be deductible on your State return.


Self-employed individuals can deduct 100% of the cost of their health insurance, including Medicare premiums.


Professional and Legal fees are deductible if incurred for the preservation of income. This deduction is no longer allowed on your Federal return. However, it may be deductible on your State return.


Miscellaneous Deductions

The following deductions are no longer allowed on your Federal return. However, they may be deductible on your State return.

  • Union dues, non-reimbursed employee business expenses (including auto expenses, work tools and uniforms), professional journals and income producing expenses.

  • Non-reimbursed business miles are deductible at 57.5 cents per mile in 2020.

  • No deduction will be allowed for travel to conventions or seminars if not related solely to your trade or business.

  • Business meals are 50% deductible.

  • Losses in traditional or Roth IRA’s if distributed, may be deductible – certain restrictions apply.

  • The above miscellaneous deductions must exceed 2% of Adjusted Gross Income.

  • Itemized deductions may be phased out based on income.

Deduction of expenses for elementary and secondary school teachers- Maximum $250 single filer and $500 joint filers.


NEW- Qualified businesses may be able to deduct 20% of qualified business income from your trade or business. Restrictions apply.


Retirement Accounts


Individual Retirement Accounts- The deadline for your 2020 IRA contribution is April 15, 2021, regardless of extensions.If you (or your spouse) do not participate in an employer's Retirement plan, you may continue to take an IRA deduction of up to $6,000 ($7,000 if 50 years or older) or 100% of compensation, whichever is less. If you (or your spouse) participate in an employer's retirement plan, the dollar limit on your IRA deduction may be reduced. This depends upon your Adjusted Gross Income and whether that income falls within a phase-out level. The law permits a contribution of up to $6,000 ($7,000 if 50 years or older) to each non-working spouse's IRA under certain conditions.


Please feel free to discuss any of the following IRA'S:

  • Educational IRA now called The Coverdell Education Savings Account- Contributions that are limited to $2,000 per beneficiary, are not deductible and are phased out ratably for taxpayers with an Adjusted Gross Income less than $110,000 for single filers and under $220,000 for joint filers. Earnings are tax free if used for public, private, religious elementary, secondary schools and college

  • Roth IRA- Taxpayers and spouses may each make annual non-deductible contributions of up to $6,000 ($7,000 if 50 years or older) of compensation. Phase out begins at $206,000 for joint filers and $139,000 for individuals.

  • Roth 401K Plan- Allows employees to contribute to a retirement savings account with after-tax dollars and withdrawing that money tax-free in retirement. The Roth 401K carries no income restrictions allowing you to contribute with pre-tax dollars while also contributing with after tax dollars. For 2020 and 2021 the maximum contribution is $19,500 or $26,000 for people age 50 and above by year end.

Additional IRA Withdrawals without penalty (certain restrictions apply)

  • Lifetime IRA distributions up to $10,000 used to purchase a home, prior to age 59 ½ (first time homebuyers only).

  • To pay qualified higher Educational Expenses of taxpayer, spouse, child or grandchild.

  • Coronavirus costs up to $100,000.

  • Distributions not exceeding medical insurance premiums of Unemployed individuals.

  • Death or Disability.

  • Other exceptions apply.

Self-Employed Retirement Accounts- The deadline for your 2020 Keogh contribution is no later than the due date (including extensions) of your return, provided your plan was opened by December 31, 2020.

Health Savings Accounts (HSA’S)- Can deduct up to $3,550 before AGI ($7,100 for family coverage).Contributions to HSA’S can be made up to April 15, 2021. An additional contribution of $1,000 is allowed if age 55 by 12/31/20.


Credits


Child Care Expenses of up to $3,000 ($6,000 for 2 or more dependents)- Related to qualifying dependents under the age of 13, which enables you and your spouse to be gainfully employed.The IRS requires the name, address and Taxpayer Identification Number (or social security number) of the childcare provider. Childcare expenses include nursery school.


Adoption- Taxpayers may take a tax credit for qualified adoption expenses, certain restrictions apply.


American Opportunity Credit is 100% of the first $2,000 of qualified tuition, fees and related expenses plus 25% of the next $2,000 of such expenses paid per eligible student, maximum credit - $2,500 - certain restrictions apply.


OR


Educational Lifetime Learning Credit- Equals 20% of qualified tuition expenses not exceeding $10,000 - certain restrictions apply.

In any tax year, a taxpayer is permitted to elect only one of the above educational credits.


Child Credit- Taxpayers may be able to claim a child credit of $2,000 for each qualifying child under age seventeen and a $500 credit for a qualifying dependent. Certain income restrictions apply.


New Small Business Credit on administrative costs to set up a qualified retirement plan.


Energy Efficiency Improvements Credit- solar electric systems or solar water heaters, as well as home improvements. Restrictions apply.


Income

  • Salaries (W-2's) and self-employment earnings (1099's).

  • Dividend and interest income (1099's). The top rate on qualified dividends is 20%. This includes foreign bank accounts.

  • Rental income and related expenses.

  • Alimony – Post 2018 agreements alimony is not taxable.

Capital Gains- The federal rate for capital gains held longer than 12 months and for qualified dividends is as follows: 0%, 15% or 20%


Gain On The Sale Of A Personal Residence- A seller of any age who has owned and used the home as a principal residence (for at least 2 out of the 5 years before the sale) can exclude $250,000 of gain ($500,000 for joint filers).

These exclusions can only be used every 2 years.


Unemployment compensation is taxable.


Social Security benefits may be taxable; subject to certain qualifications (tax-exempt interest income is included in making this calculation). Be sure to bring all 1099's for tax-exempt Social Security benefits received in 2020 may be taxable depending on your income. In 2020, those who collect Social Security at age 66 will no longer be subject to an earnings test and their Social Security benefits will not be reduced. There is no earnings cap once an individual turns 66. Individuals who turn 66 in 2020 can earn $48,600 until they reach that age. Individuals between 62 and 66 by the end of 2020 can earn up to $18,240 before they lose any benefits. Individuals who turn 66 in 2021 can earn $50,520 until they reach that age. Individuals between 62 and 66 by the end of 2021 can earn up to $18,960 before they lose any benefits.


Interest on Series EE U.S. Savings Bonds, issued after 1989 and cashed during 2020, may be excluded from tax if you incurred expenses for higher education and are under certain income limitations.


Children with unearned Income must file a return if amount exceeds $1,100 or the earned Income plus $350.

Exemptions


Exemptions are no longer allowed. Please be sure to tell us of any new dependents for 2020 and bring their social security numbers.


Taxes


The threshold for estimated tax payments for the year ended 2020 is $1,000.


Self-employed and partners in New York State may be required to pay the Metropolitan commuter tax. Certain restrictions apply. Self-employment tax rate is 15.3% for the year 2020. This rate consists of a 12.4% component for old age, survivors and disability insurance (OASDI) earnings base (subject to maximum earnings of $137,700), and the Medicare component subject to the 2.9% tax, which is unlimited. An additional 0.9% Medicare surtax may also apply.


State Deductions and Credits


The following may also apply for 2020:

  • NYS filers may claim a refundable tuition tax credit up to $400 or as an itemized deduction - certain restrictions apply.

  • New York State (529 plan)- New York State College Tuition Savings Program. NYS filers may be able to deduct $5,000 for single filers and $10,000 for joint filers for a college tuition savings program - certain restrictions apply.

  • NYS Real Property tax credit. Restrictions apply.

  • Claim for Empire State child credit. Restrictions apply.

  • NYS Sales Tax is no longer deductible on the NYS Return.

  • New Jersey Best (529 plan)- Educational program. New Jersey filers are entitled to tax free earnings in a college tuition savings program - certain restrictions apply.

  • Connecticut Higher Education Trust (CHET)- Connecticut filers may be able to deduct $5,000 for single filers and $10,000 for joint filers for a college tuition savings program – certain restrictions apply.

  • CT, NJ, NY, PA, IL & OTHERS Sales & Use Tax Due- If you purchased any items out of your home state and did not pay sales tax or paid sales tax less than the required amount in your county, you will be required to pay an additional tax on your Resident State Income Tax return. Please provide us with the amounts of each purchase. (Internet and catalog purchases should be included.)

  • NYS has enhanced the child and dependent care tax creditrestrictions may apply.

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