It’s that time of year again. Tax time.
And the question on everyone’s minds: What’s different this time around?
“So much is new. Tax professionals are working hard to interpret regulations and get information out to our clients,” said Marian Millikan, CPA and partner with Holloway Millikan CPAs and Advisors. “Most changes over the past year stem around small businesses the self-employed. There are lots of support, tax credits and funding available that they may not be aware of.”
Marian Millikan, who lives in Midlothian, sat down with Midlothian Lifestyle to talk about new tax laws, offer suggestions for people still working on returns, and provide guidance about setting up for the 2021 tax year.
How are you and your colleagues keeping up with new tax legislation?
There’s a lot to read through and not enough time! Recently I was listening to a podcast while making dinner for my family, and I heard something I thought could help one of our clients. I called him right then. How’s that for multitasking?
Anything new that’s significant to a lot of taxpayers?
The standard deduction is higher. $12,400 if filing individually; $24,800 if filing jointly. For 2020, there is the ability to deduct $300 of charitable expenses if you take the standard deduction. If you didn’t qualify for a stimulus check based on your 2019 filing, there is a chance you may be eligible for a credit through your 2020 tax filing. For businesses, there’s COVID-related support in the form of forgivable loans, grants and credits.
Any general advice?
File as soon as you can. The IRS started accepting e-filed tax returns Feb. 12, about three weeks later than normal this year. They needed time to incorporate new tax legislation passed at the end of the year, and approve changes to forms. Also, I always recommend people e-file. Paper filing takes longer to process, which means longer to get money owed to you. Also, get your refund direct deposited to your bank account.
And for people who can’t finish by April 15? As our readers receive this issue, it’s already late March.
You can file for a 6-month extension, making your new deadline Oct. 15, 2021. Be aware: That’s an extension of time to file, not an extension of time to pay. Consult with a tax professional to estimate if you may have taxes due at extension. For those paying quarterly estimated tax, the first-quarter estimates are also due April 15, 2021.
COVID-19 has shaken things up, for sure.
Every situation is unique, of course. But COVID-19 has added a new wrinkle. Many people have had direct impacts from COVID, whether they’re employees, business owners or self-employed.
Are stimulus payments taxable?
The Economic Impact Payments sent to individuals are not taxable income.
Are unemployment benefits taxable?
Yes, they are taxed by the federal government and potentially some states.
Will refunds be delayed because the IRS is backed up?
With e-filing and direct deposit, I don’t predict much of a delay. However, the IRS has communicated processing delays for paper tax returns.
Some people have trouble thinking about taxes until tax season arrives. Any advice for them?
It’s not too late. Collect your information. Consult a CPA and provide your prior return. We can get a good understanding from that. Your CPA will ask about any changes. Did you sell or buy a house, or refinance, for example? After the 2020 return is complete, they can help you plan for next year. Do you expect your income to go up or down? Should you pay estimated taxes? Contribute to an IRA?
How can people better prepare for 2021?
Try to create a system where you’re keeping good records. Collect charitable receipts right away, for example, instead of searching emails and checkbooks for them later. For businesses, I always recommend a separate business bank account. You’d be surprised how many small business owners don’t do this and it causes them a lot of stress at the end of the year.
What are some things to keep track of?
Charitable expenses. Home expenses, if you have a home-based business. Some medical expenses, but check with your tax professional. Business expenses and mileage if you’re self-employed. Some information will come to you. Homeowners will get statements from mortgage lenders. Investors will receive statements from the investment company. Student loan companies also provide statements.
Other advice for getting ready for 2021?
Know your tax implications before making financial decisions. For example, early withdrawals from 401Ks. There may be tax implications if you do so before age 59½. Even after age 59½ there can be tax implications.
Final thoughts?
It pays to consult with a CPA or tax accountant. We spend our free time (and our non-free time) studying and understanding taxes. Talk with us to make sure you’re completing your taxes accurately and are aware of benefits and credits that apply to your unique situation.
Holloway Millikan CPAs and Advisors focuses on small to midsize businesses including self-employed entrepreneurs. Services include tax planning, preparation, bookkeeping and consulting. Partners are Marian Millikan, Logan Cousins, Ryan Holloway, and Deidra Roberts.
2920 W. Broad St. Suite 104, Richmond (Gather, Scott’s Addition)
14321 Winter Breeze Dr. Suite 104 Midlothian (Gather, Midlothian)
mmillikan@hollowaycpas.com
https://www.hollowaycpas.com/
