Tax Tips – December 2020/January 2021
Steps to take as 2020 comes to a close
Q: I understand it’s time to start gathering my tax information for 2020, but can you tell me what will the per diem rate be for 2020?
A: Yes. The per diem daily rate of $66 was not changed on Oct. 1, 2020, the normal change date, therefore $66 for 2020 and into 2021. Department of Transportation workers can deduct 80% of their per diem.
Q: Is it too late for tax planning?
A: No, there is still time to plan for your 2020 taxes. If need be, you can accelerate your expenses and put new equipment into service before Jan. 1. You can also open a 401(k) retirement plan prior to Jan. 1 and fund it for your 2020 income tax return by the due date, including extensions.
You have until April 15 to fund an IRA for your 2020 income tax return. The annual contribution limit for 2020 is $6,000, or $7,000 if you’re age 50 or older (same as 2019 limit). Your Roth IRA contributions also may be limited based on your filing status and income. For contributions to a traditional IRA, the amount you can deduct may be limited if you or your spouse is covered by a retirement plan at work and your income exceeds certain levels. Roth IRA contributions are not deductible.
The limitation regarding SIMPLE retirement accounts for 2020 is increased to $13,500, up from $13,000 for 2019.
The income ranges for determining eligibility to make deductible contributions to traditional individual retirement accounts, to contribute to Roth IRAs, and to claim the Saver’s Credit all increased for 2020.
Q: Are there any other tax changes I should be aware of?
A: Yes. Be aware that the Affordable Care Act penalties for noncoverage for 2020 and beyond keep increasing. Open enrollment for next year begins Nov. 1, 2020, and ends Dec. 15, 2020.
Business standard miles are now deductible at 57.5 cents per mile, down from 58 cents in 2019.
Q: I lost the contents of my home due to a flood. How do I reconstruct my records to prove what I have lost?
A: You need to have a list of the items in your home. A good place to keep that list is on the cloud. To create the list, start by visualizing each room and its contents. Most business records can be obtained by outside sources and include copies of any tax reports filed, bank and brokerage statements, and business records from companies you do business with.
Note: Before any disaster hits, take and keep pictures of all contents in your home and store them on the cloud.
Q: What paperwork and information should I put together to prepare my 2020 income taxes?
A: Listed below is what you will need for your income tax preparation. Most tax preparers have income tax organizers to help you organize your information and list what is needed.
You can download our organizer at PBSTax.com.
- 1099s from all companies and/or individuals you’ve done work for – brokers, motor carriers, independent businesses, etc. You must report all income regardless of whether you receive a 1099 or not.
- Weekly or monthly settlements if we are summarizing.
- 1099s or year-end statements from banks for interest and dividend income, stock and mutual funds and mortgage interest statements.
- Schedule K-1 if you are involved in any partnerships or s-corporations.
- W-2P or 1099R for pension and annuity income and distribution.
- 1099s and year-end statements for unemployment compensation, Social Security income and state income tax refund.
- Nights away from home for per diem.
- Determine if you have or are going to make any contributions to an IRA, Simplified Employee Pension IRA, and 401(k) plans.
- Indicate any estimated taxes paid with corresponding dates.
- 1098s for mortgage interest paid along with property taxes paid.
- Contracts for the purchase and/or sale of equipment or property including refinancing.
- Confirmations from charities for donations in excess of $250 each.
Remember, if you have employees or independent contractors, you also are required to send out W-2s and 1099s by Jan. 31. This includes self-employed individuals who have hired their children to do work for their business. You must issue W-2s to your children to get the deduction. LL
This article has been presented by PBS Tax and Bookkeeping Service, a company that has been providing income tax and bookkeeping services to the trucking industry for over a quarter century. If you would like further information, please contact them at
800-697-5153. Visit their website at PBSTax.com. Everyone’s financial situation is different. This article does not give and is not intended to give specific accounting and/or tax advice. Please consult with your own tax or accounting professional.
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