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2020 was a nightmarish year for many families. But thanks to recent legislation, you could see a silver lining in the form of major tax breaks when filing your income taxes this spring. First up, although it’s technically not a tax break, the IRS announced this week that the deadline for filing your 2020 federal income taxes has been pushed back from April 15 to May 17, 2021, which gives you an extra month to get your tax return handled.

The postponement applies to individual taxpayers, including those who pay self-employment taxes. But the extension does not apply to first-quarter 2021 estimated tax payments that many small business owners file. So if you file quarterly taxes, contact your tax advisor now if you haven’t already done so.

Additionally, the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed in March 2020 provides individual taxpayers with several hefty tax-saving opportunities, many of which are only available this year. What’s more, President Biden’s new relief package, known as the American Rescue Plan (ARP), which went into effect in March 2021, not only offers additional stimulus payments to most Americans, but it also includes significant tax relief for those taxpayers who lost their job and had to rely on unemployment benefits in 2020.

While there are dozens of potential tax breaks available for 2020, here are 7 of the leading ways you can save big money on your 2020 tax return.

1. Stimulus Payments

As part of the CARES Act, millions of Americans received stimulus checks in 2020, and those payments were an advance refundable tax credit on your 2020 taxes. This means that no matter how much you owe (or get back) on your 2020 taxes, you get to keep all of the stimulus money and won’t have to pay any taxes on it.

Because the IRS didn’t have everyone’s 2020 tax returns when they issued the stimulus checks, they based the stimulus payments on your 2018 or 2019 returns, whichever one you had most recently filed. Using data from those years, the stimulus payments from 2020 phased out at an adjusted gross income (AGI) of $75,000 to $99,000 for singles and at $150,000 to $198,000 for married couples filing jointly.

Given that the stimulus payments were based on your AGI for 2018 or 2019 but technically apply to your 2020 AGI, you may find that your payment was either too much or too little. But there’s good news—even if your financial situation has improved since 2018 or 2019 and you received too much stimulus money based on your 2020 income, you get to keep the overage.

By the same token, if you received too little or only partial payment on your 2020 stimulus, you can claim what you missed in the form of a recovery rebate credit when you file your 2020 taxes. Not sure how this would work? Here are three scenarios where you may be entitled to additional stimulus money.

• If your AGI for 2018/19 is higher than your AGI in 2020, you can claim the additional amount owed when you file your 2020 taxes this April.
• If you had a child in 2020, but didn’t get the $500 credit for dependent children in your stimulus payment, you can claim the child when you file in 2021.
• If someone else claimed the child based on 2018/19 returns, but you can legitimately claim that child on your 2020 return, you can get the $500 tax credit when you file in 2021, and the person who got it based on 2018/19 returns will not have to pay it back.

2. Unemployment Benefits

When the pandemic stalled out the economy, many Americans lost their jobs and were forced to rely on unemployment insurance to pay the bills. That said, unemployment benefits are generally taxable, so if you took them, without having taxes automatically deducted, you were looking at having to pay income taxes on that money when you file your 2020 return.

However, taxpayers who received unemployment benefits in 2020 were provided with significant relief with the passage of President Biden’s American Rescue Plan (ARP). Under the ARP, the first $10,200 of your 2020 unemployment benefits are tax-free if your annual household income is less than $150,000. The ARP doesn’t provide a different threshold for single and joint filers, so both spouses are entitled to the $10,200 tax break, for a potential total of $20,400, if both spouses received the benefits.

Note that if your unemployment benefits exceed $10,200 in 2020, you’ll need to report the excess as taxable income and pay taxes on the amount over the limit. And if your household income is over $150,000, you’ll need to pay taxes on all of your unemployment benefits just like you would before the passage of the ARP.

If you already filed your 2020 return and paid taxes on your unemployment benefits before the passage of the ARP made those benefits tax free, the IRS plans to automatically process your refund. This means you won’t have to tax any extra steps, such as filing an amended return, to secure the refund. The IRS will release further details on this issue in the coming weeks.

3. Waived RMDs

You are typically required to take an annual required minimum distribution (RMD) from your IRA, 401(k), or other tax-deferred retirement account starting in the year when you turn 72, but the CARES Act temporarily waived the RMD requirement for 2020. The waiver also applies if you reached age 70½ in 2019, but waited to take your first RMD until 2020, as allowed under the SECURE Act.

RMDs generally count as taxable income, so taking this waiver means that you may have lower taxable income in 2020 and therefore owe less income taxes for 2020.

However, there are a number of factors to consider, including the state of the market and your living expenses, when deciding whether or not to waive your RMDs. Given this, consult with us, as your Personal Family Lawyer®, or your tax professional before making your final decision.

Next week, in part two of this series we’ll cover the remaining four ways you can save big money on your 2020 tax bill.

Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. If you’re ready to create a comprehensive estate plan, contact us to schedule your Family Wealth Planning Session. Even if you already have a plan in place, we will review it and help you bring it up to date to avoid heartache for your family. Schedule online today.

As you’ve undoubtedly heard by now, the 2017 Tax Cuts and Jobs Act (TCJA) is the most sweeping change to the U.S. Tax Code in more than 30 years. And while the legislation provides many of the biggest breaks to large corporations, it offers numerous benefits to smaller businesses as well.

Due to the immense scope of the legislation and the fact that 2018 was the first year these cuts went into effect, many tax experts (and even the IRS) are still studying all of the changes the TCJA may ultimately bring about. Given this, you may have overlooked some benefits you could have taken advantage of in 2018—which you won’t want to miss out on in 2019 and beyond.

Though it’s impossible to detail all of the advantages the law might offer you in this post, here are 3 big breaks you should be aware of: 

One of the TCJA’s biggest changes was dramatically lowering the tax rate for C corporations. Most large companies like those listed on the stock exchange are C corporations, and they saw their tax rate drop from 35% down to 21%.

If you run a small business, however, you’re probably not structured as a C corporation and won’t qualify. You’re most likely set up as a sole proprietorship, partnership, limited liability company (LLC), or an S corporation.

Recognizing this, Congress wanted to give these businesses a tax break, too. But since such businesses are “pass-through” entities, Congress couldn’t just lower their business tax rate, because the taxes paid by these companies pass through and are paid at the owner’s personal rate.

In the end, what Congress came up with was a straight 20% deduction on “qualified business income” (QBI).  This means many small businesses will only be taxed on 80% of their net income, which can be a massive money saver.

That said, the 20% deduction is subject to some limitations, so not all pass-through entities will qualify, especially those with higher incomes. Schedule a meeting with us and/or a qualified CPA to see if your company can claim the 20% deduction on QBI.

Another new—but quite temporary—benefit for small businesses is the TCJA’s family-leave tax credit. Starting in 2018, if you offer paid family-leave benefits to your employees, you may qualify for a tax credit. This credit is specifically aimed at businesses that aren’t legally required to have a Family Medical Leave Act (FMLA) policy in place.

The tax credit only lasts through 2019, so if you didn’t claim it in 2018, you can still get it this year. There are some requirements to qualify, such as having a written family-leave policy and offering your team at least two weeks paid time off, so consult with us and/or your tax preparer to see if your company qualifies.

Starting in 2018, the TCJA increased the cap on the Section 179 deduction from $500,000 to $1 million. Section 179 allows you to write off the entire amount you pay for qualified business equipment in a single year, rather than having to depreciate it over many years.

Most business property—new and used—such as cars, computers, software, machinery, equipment, and office furniture will qualify. TCJA also expanded Section 179 to include building improvements like HVAC, fire protection systems, and security systems. Real estate, however, does not qualify.

To take the deduction for 2019, the item must be purchased and put into use during the 2019 calendar year, and it must be used more than 50% of the time for business purposes. Additionally, the law caps total equipment purchases for the year at $2.5 million, making this incentive specifically aimed at true small businesses.

Again, these three advantages are only a fraction of what’s potentially available under the new law. Even if you don’t qualify for any of these, it’s almost certain there are other tax savings you can benefit from. Be sure you consult with us to make sure you don’t miss a single one. Schedule a visit with us today.

We offer a complete spectrum of legal services for business owners and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer you a LIFT Your Life And Business Planning Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. Schedule online today.

If you have pets, my guess is that you love them as much as you do your children, but I’m also guessing that you have not provided any written or, better yet, legally documented instructions about what should happen to them, if you become incapacitated or when you die. If you have, read this article with an eye to ensuring you’ve checked all the right boxes for the beings you love. If you haven’t, read on because it’s time to take action, and we can make it easy for you to do the right thing by the pets you love.

Let’s start by looking at what happens if you become incapacitated or when you die, if you’ve done nothing to ensure the well-being and care of your pets. It may be that if you do nothing, one or more of your friends and family will step forward to take care of your pets. But, will the person who steps forward be the person you would choose? And, will they be able to easily afford to care for your pet, in the way you do?

Will they feed your pet the same food you do?

Will they be able to spend as much time and energy with your pet as you do?

Will they be able to offer your pet the same quality of life you do?

Do you care about these sorts of things?

If you do care, you do need to take action. You cannot just leave the well-being and care of your pets to chance. If you don’t designate at least one person, and ideally one person plus backups to care for your pets, and provide instructions to the people you’ve named, and perhaps also money to support the care of your pets, your pets could become a burden to your friends and family, or even be brought to the humane society.

So, step one in all circumstances is to legally name the people you would want to care for your pets, in the event you cannot. You should name these people in your will, and also in a “pet power of attorney” providing for your pet’s care in the event of your incapacity.

Step two is to give the people you’ve named specific instructions about how you want your pets to be cared for, if you cannot do it, including type and amounts of food, any medications needed, exercise plan, and any other special things you know about your pets that any caretaker should know.

Finally, step three is to consider whether you need to provide financial resources to care for your pets.

If your pet has any special needs, or if you want to provide funding for training, regular exercise, or a certain kind of food or care, it’s up to you to provide the financial resources to the people you’ve named to take care of your pets.

The way to provide funding for the care of your pets is through a pet trust. I’ll share the details of pet trust planning with you in next week’s article. So if you are reading this on our website, and not yet subscribed to our email newsletter, get on our email list and I’ll send you that article next week.

Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. If you’re ready to create a comprehensive estate plan, contact us to schedule your Family Wealth Planning Session. Even if you already have a plan in place, we will review it and help you bring it up to date to avoid heartache for your family. Schedule online today.

If you are a single parent, life for you right now probably couldn’t get any busier. You are likely being pulled between work, school activities, and home – and the inevitable emergencies that fill the lives of single parents everywhere.

Being a single parent is a huge responsibility, even if you do share time with a parenting partner, and especially so if you don’t. Regardless, as a single parent, your children’s lives are now largely in your hands.  So what would happen to them if something happened to you?  Who would take care of them?  Who would pay for their housing and food?  Who would pay for their education?  These are questions you need to get answered, and the best way to do that is through estate planning.

Having an estate plan that covers the care of your children in case you should be in a severe accident, fall ill, or die welcomes peace of mind for the single parent knowing everything and everyone they love is taken care of.  Here are the must-haves that can protect your children if something were to ever happen to you:

A will lets you name the person responsible for your estate and belongings as well as who will inherit your assets. Most importantly this is the legal vehicle you use to name a guardian for your children,  without a will, the state will decide their fate. The greatest risk you leave behind when ignoring this piece of your estate plan is that your children could be taken into the care of strangers at any time.

There are so many benefits of a living trust for single parents.  First, a trust enables you to still control your money and property while you’re able, but if you die or become incapacitated, it transitions that decision-making authority immediately to the person you have named as your trustee (obviously someone you can trust and count on to do what you would have wanted).  If your children are still minors or even young adults their inheritance can be handled for them until the time comes when they are capable (and you decide that time).  Plus, if you have a trust, your estate doesn’t have to go through, which can be costly and time-consuming. Without trust, you risk draining your hard-earned money on costs. This is not ideal if your children need to continue living in their homes and having their expenses paid.

As a single parent, you are likely the only signatory on your mortgage, your bank accounts, and other financial instruments.  What would happen if you became incapacitated and there was no one to pay the mortgage or the bills?  That is why it is important to have a durable power of attorney in place. When choosing your power of attorney, it should be someone you trust managing your financial affairs, while also make legal decisions on your behalf if you are unable to do so.

An advance medical directive gives you the legal power to the person you choose to make your health care decisions in case you are not capable of doing so yourself.  This is especially important if you are not re-married or do not have immediate family members nearby.

Your life insurance policy, retirement accounts, and brokerage accounts all require beneficiary designations.  Those you designate to receive the assets in these accounts will only receive them if you execute the proper beneficiary forms!  They cannot pass to your heirs via a will or trust. And minor children should never be named as beneficiaries as they are not legally able to own assets. Talk with us today, your Personal Family Lawyer® about strategies to leave these assets to your children without court intervention.

Developed by a nationally recognized attorney who is a single mom herself, the Kids Protection Planning Kit® provides single parents with the legal planning tools they need to make sure there is never a question about who will take care of your kids if you are in an accident. The kit includes legal documents to name short- and long-term guardians, instructions for those guardians, medical powers of attorney for your minor children, and more.

You can name your guardians right now with my Kids Protection Plan Tool, It only takes minutes, and it’s absolutely free.

This article is a service of Christine Faulkner, Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.

Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. If you’re ready to create a comprehensive estate plan, contact us to schedule your Family Wealth Planning Session. Even if you already have a plan in place, we will review it and help you bring it up to date to avoid heartache for your family. Schedule online today.