President Biden recently announced his $1.8 trillion American Families Plan (AFP), the third step in his Build Back Better policy initiative. The announcement followed the previous releases of the proposed $2.3 trillion American Jobs Plan and the Made in America Tax Plan. These plans propose major investments in various domestic initiatives, such as expanded tax credits for families, offset with tax increases on high-income individual taxpayers and corporations.
Here’s a summary of some of the proposals:
The recently passed American Rescue Plan Act (ARPA) includes 600 pages of new legislation- a $1.9 trillion COVID relief package. The Act contains retroactive and prospective tax breaks including exclusions from income, new tax-free grant programs, and credits.
On March 17, 2021 the IRS announced an extension of the tax deadline for Individual Income Tax Returns (Form 1040) to May 17, 2021 from April 15. This extension applies to both the filing of the Form 1040 or the filing of an extension form. This also extends the due date for tax payments for individuals only for payments related to 2020 to May 17. This change does not apply to states, though it is likely some/all states will extend the deadline as well.
Long Term Care through a Mandatory Payroll Tax
The Concern: As baby boomers are rapidly moving into retirement, long-term care services provided by Medicare are putting an increasing strain on budgets. 7 out of 10 people will need long-term care after turning 65, and 70% of Americans rely on public benefits such as Medicaid to cover long-term care. In fact, Washington’s spending on Medicaid-funded long-term care is projected to double to $4.01 billion per year in 2030.1
Earlier this month, the IRS issued notices to approximately 260,000 taxpayers stating they haven't filed their 2019 federal tax return. These notices, referred to as CP59 notices, are issued yearly to identified taxpayers who have failed to file tax returns due the prior calendar year (Tax Year 2019).
The Tax Cuts and Jobs Act of 2017 brought about many tax changes, including a reduced deduction amount for meals and entertainment. In general, most meals were 50% deductible.
The time has come to start thinking about those 2020 taxes. At this point, tax documents have probably started showing up in your mailbox. While it may seem like there is plenty of time, the sooner and more organized you can make your documents, the smoother the process will be.
Just like last year, we thought it might be helpful to create a checklist for easy organizing of your documents that will help to streamline the process for your accountant:
- Make sure to fill out the questionnaire located towards the front of the organizer at a minimum.
- Update your address, phone and email address as necessary.
- Original tax documents are preferred to copies or photos.
- Provide one copy of your 1099's. You can keep any duplicate copies.
- Do not use highlighters on your tax documents.
- No need to tear apart tax documents if they are perforated, just keep them together.
- Avoid post it notes. Write notes and questions on a separate piece of paper or on the tax organizer.
- If you are grouping documents together, avoid stapling and taping them; this will make it easier when your documents are being scanned.
- For charitable deductions, make sure to send us the thank you letters and donation receipts for donations over $250. You can summarize donations less than $250.
- If you are summarizing your medical expenses, do not send us the receipts, just keep them in your files.
- If you are summarizing your expenses for Schedule C or your rental, do not send us the receipts.
- Stack all supporting documents behind the organizer. They do not need to be organized within the organizer.
- When in doubt, send us the document. Your accountant will review and determine if it needs to be included in your tax return.
- Last but not least, please contact us if you have any questions.