2020 was a
year unlike any other. The COVID-19
virus affected the lives of every single person in America.
It was the
first year in my tenure, and probably in history, that the mid-April initial
filing and paying deadline for federal, and most state, income tax returns was
extended – to July 15, 2020. Taxpayers
had until July 15th to file their 2019 federal returns and pay any
tax due, without penalty or interest, and to make the first two quarterly federal
estimated tax payments.
The 2020 tax-filing
season – my 49th - ran smoothly for me, despite the pandemic. There were no auto, computer, equipment, or
weather issues of consequence. I have
been working at home for more than a dozen years, so the “stay at home” order
issued at the end of March did not affect me.
And my business did not suffer financially from the virus – clients
continued to send me their stuff, although some later than usual, and money continued
to come in. But much less was going
out. My business and personal expenses
were greatly reduced.
I ended the
extended tax filing season with only 7 GDEs (the “E” is for “extension”) - obviously
due to the extended deadline - and ended the year preparing 12 less sets of
returns than I did in 2019.
There were no
real changes to tax law that affected returns prepared in 2020, other than the
last-minute retroactive extension of the now infamous “extenders” by Congress
at the end of 2019, a common practice, which affected very few of my clients.
The big
change in federal forms for the year was what I call the return to sanity. The completely ridiculous “postcard” format
of the 2018 return was gone and the 2019 Form 1040 was most certainly “more
better”, with a return to a more logical flow of information. There was a new Form 1040-SR for senior
filers, created for no other reason than it was required by the Bipartisan
Budget Act of 2018, which was line-for-line exactly the same as the 2019 Form
1040 except it has bigger print and included a Standard Deduction chart. And the previous 6 supplemental schedules to
the 1040 was reduced to 3.
Thankfully,
the excessive federal under-withholding FU for 2018 was for the most part fixed
for 2019 income. As a further correction
to the problem, at the beginning of the year the IRS issued a new Form W-4 for
calendar year 2020 withholding which completely did away with the concept of “withholding
allowances”. The revised format, while more involved and complicated, appears
to be, in my opinion, an improvement - but I will have to wait until the 2021
filing season to find out if it caused any under-withholding issues.
There was no
change for me to New York State return filing, but there was a change to my NJ
filings. The NJ Division of Taxation did
away with its online NJWebFile system, which I had used whenever possible to submit
NJ returns in the past. But it was
replaced with a superior “New Jersey Online Income Tax Filing” system, which
allowed me to electronically submit all 2019 NJ-1040s (NJWebFile had many
limitations), and request direct deposit of refunds when applicable, online
free of charge without the need for separate email addresses and passwords for
each return. I used this system for just
about every NJ return I prepared, except for a few balance due returns.
The biggest issue
for 2020 was the excessive IRS delay in issuing refunds, regardless of how the
return was filed. The IRS offices were
closed due to the pandemic from the end of March through mid-July and nobody
was opening the mail or processing returns.
When the offices finally opened up again there was a huge backlog of
returns and correspondence to process.
However, when refunds were finally issued they did include interest from
April 15th until the issuance of the payment. For the most part,
state refunds, at least for my clients, were not similarly delayed.
There was one
major piece of tax legislation affecting 1040s that was signed into law (on
March 27th) in 2020 – The Coronavirus Aid, Relief and Economic
Security Act (aka CARES). Among other
things, including business and payroll tax credits and benefits, the Act provided
for –
* “Recovery
Rebate” stimulus payments of up to $1,200 per taxpayer and $500 per qualifying
child, phased-out based on AGI,
* penalty-free
withdrawals of up to $100,000 from retirement accounts for “coronavirus-related
distributions”,
* a waiver of
2020 Required Minimum Distributions (RMDs) from retirement accounts (no RMD was
required for anyone for 2020), and
* an “above-the-line”
deduction on the 2020 Form 1040 (or 1040-SR) of up to $300 of qualifying
charitable contributions for taxpayers who do not itemize.
The stimulus
payments were to be calculated based on 2019 tax return information, but due to
the closing of the IRS offices and the delay in processing 2019 returns many
were based on 2018 information. The
payment will be reconciled on the 2020 tax return and those who did not get a
full, or any, payment can claim a refundable credit for any shortage when
filing their 2020 return.
As of this
writing deplorable and despicable Trump has refused to sign the second
bi-partisan COVID economic stimulus legislation (part of the “‘‘Consolidated
Appropriations Act of 2021’’) - passed just before Christmas - which would provide
$600 stimulus payments, extended unemployment checks and eviction protection,
and extend and refine some tax benefits – after it had been announced that he
would. His action was definitely NOT because
he cares about Americans getting $2,000 instead of $600 - but because Trump
wants to punish McConnell for not publicly endorsing and supporting his demented
election delusions. We will need to see
if Congress will override any veto – stay tuned here at TWTP for updates. THIS JUST IN - idiot Trump has finally signed the legislation. Look for a review of the 1040 components of the ACT here in a few days.
The 2020 election
– Biden’s win a true victory of intelligence and patriotism over ignorance and
hate – put an end to our national nightmare (i.e. the Trump presidency). The Democrats maintained control of the
House, but we will need to wait until the special Georgia election in January
2021 to see if the Republicans lose control of the Senate. If Republicans remain in control there will
be little to no chance of any substantive non-COVID related tax legislation being
enacted until at least 2023.
So, my fellow
tax pros, as I ask you each year at the end of my year in review – did I miss
anything important?
TTFN
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