We have legislation pending today – which might actually go through!
Until some of the data released this morning, I didn’t think the new budget legislation was going to have any impact on our 2020 tax returns…but there are strong hints that aside from additional stimulus funds and unemployment funds – there may also be a provision to allow us to deduct the expenses we paid with the PPP loans. (Don’t hold your breath – but a definite MAYBE!)
When we get news, we will add it to the materials in our December COVID19 Update class – so it will be there for all our students, family members and upgraded students.
In the meantime, I want to alert you that next year will be a frustratingly confusing tax year for everyone – taxpayers and tax professionals, alike.
Two things will be critical for tax professionals:
1) To keep updated on tax law and procedure changes on a very regular basis – because I guarantee there will be more changes coming during the first 6 months of 2021.
2) To have the credentials necessary to represent your clients before the IRS and the state taxing agencies – Enrolled Agents (EAs), Certified Public Accountants (CPAs) or Attorneys.
The problems I anticipate lie in these four main areas:
1) The stimulus checks – people who didn’t get them, those who did, and those who need to get additional funds.
Note: Only people with Social Security numbers (SSNs) are eligible. And a joint return with a spouse who has an ITIN is not eligible. So, folks who are eligible to get green cards or US citizenship – it’s time to start the process IMMEDIATELY.
And put your 2020 tax returns on extension until that valid SSN is issued.
2) People who received (and will receive) unemployment benefits – and didn’t take withholding for IRS (and certain state taxes). There will be some substantial balances due. They will need help to establish payment plans,…or…
3) People who drew money from retirement accounts. Sure, you probably are not subject to the 10% early withdrawal penalty from the IRS (and possibly your state). But you will have to pay tax on that income – either now – or over three years. Tax pros will need to understand how to handle that deferred reporting.
HOWEVER, all that extra income is going to cause enormous OTHER tax problems because of the increase to Adjusted Gross Income (AGI). A variety of adjustments to income and tax credits won’t be available. WORSE! People who received insurance coverage through the Marketplace may find themselves having to repay thousands of dollars of the advanced premiums because their AGI has risen to exceed 400% of the poverty level.
4) And the PPP Loans and EIDL loans that people received – and did or didn’t use correctly or took the money out for personal use. There will be lots of struggles, paperwork – and balances to deal with.
There will be more issues. Many more.
So if you’re not already an EA, CPA or attorney and you want to help your clients, it’s time to become an EA as soon as you can – because, at this time, this is the fastest way to get the authority to represent clients before the IRS.
As a result, I have a very unusual, special offer, something I have never done before. You are invited to join the TaxMama® Premium EA Exam Course right now – so you can start studying and pass at least one or two of the exams by the end of February – and finish up in the summer with the live sessions.
Or you can join the Self-Study class for the entire study process.
This is the lowest price I will ever offer. The details are here.
(To see what all is included, follow the links on this page)
This opportunity will end on December 28th and will not be renewed.
And remember, you can find answers to all kinds of questions about taxes and business issues, and EA Education, free.
Where? Where else? At https://iTaxMama.com/AskQuestion
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