Tax Season is now upon us. February 12th the IRS will open up for e filing of tax returns. So now you are gathering records, you may be asking what documents should I save for my taxes? How long should I keep my records? What items are deductible on my tax returns. Here is a quick summary guide.
CARES ACT RULES
- Recovery rebate credit – if you did not receive the full amount of your economic impact payments last summer 2020 or December 2020 you can claim a recovery rebate credit on your 2020 income tax return $ 1,200 for single and $ 2,400 for married filing joint plus $ 500 per qualifying child. Phase out for incomes above $ 150,000 married filing joint $ 75,000 single.
- 10% early withdrawal penalty waived; retirement distributions up to $ 100,000 if made for coronavirus related reasons.
- Required minimum distributions (RMDs) are suspended: for IRA’s.
- Charitable Contributions; Above the line deduction of up to $ 300 for non itemizers.
Business Self Employment Taxes
- Tax Rate of 15.3% for single member LLC’s and self- employed independents
Standard Deduction, most people will not itemize, and therefore will claim standard deduction. It should also be noted unreimbursed employee business expenses such as auto and office at home are no longer deductible.
- Single; $ 12,400
- Married: $ 24,800
- Head of Household: $ 18,650
- Married over 65; $ 27,400
- Single over 65; $ 14,050
Business Standard Mileage Rate
- Business mileage rate is 57.5 per mile. Note that business mileage is no longer deductible for unreimbursed employee business expenses.
Retirement Plan Limits
- 401k maximum deferral $ 19,500 plus catch up $ 6,500 if 50+.
- IRA contribution $ 6,000 plus $ 1,000 for 50+.
Business Tax Depreciation
- Bonus 100% of cost basis of qualifying property for first year placed in service. No limit.
- 179 deduction limits $ 1,040,000.
How long should I retain records and what is the Statute of Limitations for IRS Audit
- Generally, the IRS has 3 years from filing date to audit your tax return.
- Exception, 3 years becomes 6 years if you underreport your income by 25% or more.
- If you own a business, I recommend you retain your records for at least 7 years, and some items such as depreciation, cost basis and copies of prior tax returns should be permanent.
