What does the recent stimulus package include?
The Taxpayer Certainty and Disaster Tax Relief Act of 2020 (TCDTRA) aka “Coronavirus Stimulus 2.0” passed Congress on December 21, 2020, as part of the 5,000+ page Consolidated Appropriations Act of 2021. It extends and amends various expiring tax provisions and has a number of provisions that may impact you.
- The most prominent feature was a fresh round of $600 stimulus checks for certain taxpayers. If you qualify and haven’t received a check, you will get your $600 as a refundable tax credit when you file your 2020 tax return.
- Unemployment benefits were extended (including another $300/week of unemployment insurance relief for 11 weeks).
- Extension of the 100%-of-AGI limit on cash contributions to a charity into 2021.
- Allows one to carry forward unused Flexible Spending Account balances all the way through 2022.
- Reduces “permanently” the hurdle for Medical Expense Deductions to 7.5%-of-AGI.
- To help restaurants and entertainment venues, allows deductions for 100% of meals and entertainment expenses.
- Eliminates the Tuition and Related Expenses deduction for education and replaces it with an expanded Lifetime Learning Credit, and more.
- For 2021, allows taxpayers that do NOT itemize to claim a $600 per couple ($300 for singles) tax deduction for charitable contributions in addition to the standard deduction. The deduction was limited to a total of $300 whether filing a single or a joint return in 2020.
- Small businesses that experienced at least a 20% decline in quarterly revenue may get an expanded Employee Retention Tax Credit (potentially up to $7,000/employee/quarter).
- Creates a second forgivable Paycheck Protection Program (PPP2) loan program for small businesses if revenue was down by at least 25% in any quarter of 2020.
On the other hand, it’s notable that some 2020 provisions were not continued. Most notably, penalty free Covid-related Distributions from IRAs and retirement accounts are gone and Required Minimum Distributions from such accounts are back in 2021.
New tool to combat identity theft
The IRS’ Identity Protection PIN program for victims of identity theft is now open to anyone that wishes to voluntarily opt into the “IP PIN program.” Crooks had been electronically filing tax returns and claiming refunds using unknowing victims’ Social Security numbers. Learn more and get an Identity Protection PIN (IP PIN) directly from the IRS here.
Here are a few key things to know about the IP PIN Opt-In program.
- This is a voluntary program.
- Taxpayers must pass a rigorous identity verification process.
- Spouses and dependents are eligible for an IP PIN if they can verify their identities.
- An IP PIN is valid for a calendar year.
- People must get a new IP PIN each filing season.
- The online IP PIN tool is offline between November and mid-January each year.
- Correct IP PINs must be entered on electronic and paper tax returns to avoid rejections and delays.
- Taxpayers should never share their IP PIN with anyone but their trusted tax provider.
- The IRS will never call, text or email requesting your IP PIN.
- People should beware of scams to steal their IP PIN.
- There currently is no opt-out option but the IRS is working on one for 2022.
We continue to help the Orlando Sentinel with reader questions by participating in a free call-in hotline and its Ask An Expert feature. (Some links require a subscription to view.) Mike Salmon, CFP®, Charlie Fitzgerald, CFP®, Derrick Chandler, CFP®, and Tommy Lucas, CFP® participated in and answered questions from callers and some of their answers have been published in recent issues of the paper.
Derrick explained the tax implications of receiving unemployment. With interest rates so low many homeowners are exploring refinancing. In a January piece, Derrick explains how some banks are lowering the interest rate on mortgages with no fees or refinancing costs in order to keep the business.
Mike laid out some of the options a man in his early 70s has for his 401(k) while still working part time. Meanwhile, Charlie gave some guidance to a 30-year-old that has been a diligent saver on what to do with the funds accumulated.
In the News…
Welcome aboard Kevin McDermott, CPA! Kevin McDermott, CPA will be joining us beginning March 1st in the position of Tax Manager. Kevin will help prepare and review tax returns for MFT clients and help with other tax related work our tax team does. For instance, we handle IRS inquiries on behalf of our clients and perform extensive tax projections for many of our clients which enable us to deliver precisely on our tax strategies.
Brokerages, banks, insurance companies and other “advisers” typically talk about taxes but won’t stand behind what they say because they technically don’t give tax advice. Their fine print disclosure will say they are not tax advisers and nothing they say should be construed as tax advice. Giving advice and standing by it is a truly unique offering for a financial planning firm.
Charlie was quoted extensively in a CNBC article “Is silver the next Gamestop? Social media may fuel speculation“ about the surge in silver prices. “… it’s speculative trading. It can turn on you badly,” Fitzgerald said. “During moments of panic and speculation, it will separate from reality. You’ll get huge spikes. It’s emotion buying,” he added. “And gravity will bring it back down to reality.”
The Journal of Financial Planning gave Dan some kudos. His June cover article, “Surviving a Bear Attack” was selected as one of the Best of 2020 in a special issue of the publication. Dan also learned the article was being translated for inclusion in the Financial Planning Association of Malaysia’s member publication.
Things We Found of Note
$40,000 – Projected average net worth of millennials in 2030 (Forbes)
$68 trillion – Amount of assets projected to transfer from baby boomers to Gen-Xers and millennials over the next 25 years. (Cerulli)
39% – Percentage of Americans surveyed that could not pay for a $1,000 surprise expense without some form of borrowing (Bankrate)
Moisand Fitzgerald Tamayo, LLC is an Orlando, Tampa and Melbourne, Florida based fee-only financial planner serving central Florida and clients across the country. Moisand Fitzgerald Tamayo, LLC specializes in providing objective financial planning, retirement planning, and investment management to help clients build, manage, grow, and protect their assets through all phases of one’s life and the many transitions in between. If you have any questions or would like to discuss anything further, please give us a call or send us a note. If you are not a client and wish to receive emails notifying you of new posts – no more than once per month – fill out the subscription information in the sidebar to the right. For more frequent updates, follow us on Facebook, LinkedIn, or Twitter.
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