Happy holidays!  We just celebrated our 8 year anniversary this month and have been continuously looking for the best ways to help our clients, even in these challenging times!

As we wrap up 2020, year-end tax planning has never been more crucial. This year brought challenges and disruptions that significantly impacted your personal and financial situations – COVID-19, economic relief measures, new tax laws and political shifts. Now is the time to take a closer look at your current tax strategies to make sure they are still meeting your needs and take any last-minute steps that could save you money.

We’re here to help you take a fresh look at the health of your tax and financial well-being in the tax year.  Here’s a look at some issues to consider as we approach year-end.

 

GET READY FOR TAX SEASON 2020

Now is an important time to start preparing documents and getting organized for 2020 tax filing. Here are some common documents that are often necessary:

  • Salary statements
  • Monthly bank statements for foreign bank account reporting
  • S. and foreign travel records (for taxpayers living overseas)
  • Foreign tax returns and payment confirmations
  • Salary statements
  • Monthly bank statements for foreign bank account reporting
  • S. and foreign travel records (for taxpayers living overseas)
  • Foreign tax returns and payment confirmations

 

2020 DUE DATES
Here is a list of some important federal tax return due dates:
http://americanpacifictax.com/important-u-s-tax-filing-deadlines-for-taxpayers-overseas/

 

TAX PAYMENTS DUE

If you need to pay US federal estimated taxes, 2020 4th quarter payment is due on or before January 15, 2021.
The IRS provides more information about estimated taxes here https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes  and online payments can be made via the IRS here: www.irs.gov/payments

FOREIGN TAX CREDITS

Please also manage your Hong Kong or other foreign country tax payment schedule to determine if you should pay your foreign income taxes before the end of the year 2020. If you have not received your 2019/20 Hong Kong Tax

Assessment, you may contact IRD (the phone number is shown at the right top corner of your prior year tax assessment).

ECONOMIC IMPACT PAYMENT (EIP)

Eligible individuals received a payment of $1,200 ($2,400 for joint filers) plus $500 for each qualifying child, with payments phased out based on adjusted gross income. The payments are treated as advance refunds of a 2020 tax credit. If you received an EIP, you should have received IRS Notice 1444, Your Economic Impact Payment. Keep this for record-keeping purposes.

CHARITABLE DEDUCTIONS

Unique to 2020, individuals who do not itemize their deductions can take an above-the-line charitable deduction of up to $300. Such contributions must be made in cash and made to qualified organizations.

Also unique to 2020, to the extent you make a cash contribution to a public charity, the 60% of adjusted gross income limitation that normally applies to cash contributions is raised to 100%.   Hence, it’s possible you can offset a significant part of your income (or all of it) with a large cash donation. For corporations, the 10% of taxable income limitation is increased to 25%.

KEY TAX CONSIDERATIONS RELATED TO COVID-19

Many tax provisions were implemented under the Coronavirus Aid, Relief and Economic Security (CARES) Act aimed to help individuals and businesses deal with the COVID-19 pandemic and its ongoing economic disruption.

DISTRIBUTIONS FROM RETIREMENT PLANS 

The CARES Act provides for expanded distribution options and favorable tax treatment for up to $100,000 of coronavirus-related distributions from eligible retirement plans (certain employer retirement plans, such as section 401(k) and 403(b) plans, and IRAs) to qualified individuals, as well as special rollover rules with respect to such distributions.  Basically, qualified individuals can withdraw up to $100,000 penalty free, with the option of re-contributing the amount back in the next three years.   The amounts withdrawn can be reported ratably over three years on the tax returns, so the tax impact will be less.

 

STATE TAX OBLIGATIONS RELATED TO TELEWORKING ARRANGEMENTS FOR EMPLOYEES

As the COVID-19 outbreak continues, many employers are encouraging or requiring their employees to work from home (i.e., telework). Such remote working arrangements could potentially have tax implications that should be considered.

 

FRAUDULENT ACTIVITY REMAINS A SIGNIFICANT THREAT

Our firm takes security seriously and we think you should as well. Fraudsters continue to refine their techniques and tax identity theft remains a significant concern. Beware if you:

  • Receive a notice or letter from the Internal Revenue Service (IRS) regarding a tax return, tax bill or income that doesn’t apply to you
  • Get an unsolicited email or another form of communication asking for your bank account number or other financial details or personal information
  • Receive a robocall insisting you must call back and settle your tax bill

Make sure you’re taking steps to keep your personal financial information safe. Let us know if you have questions or concerns about how to go about this.

 

THE AFFORDABLE CARE ACT (ACA) AND YOUR TAXES

The U.S. Supreme Court is expected to rule on the constitutionality of the ACA in 2021. Though many questions remain, the penalty that the ACA imposes on individuals who do not have health insurance was repealed. However, other aspects of the ACA are still in place. Contact us if you have questions about how this affects you.

 

IMPORTANCE OF RETIREMENT PLANNING

We recommend you review your retirement situation at least annually. That includes making the most of tax-advantaged retirement saving options, such as traditional IRAs, Roth IRAs and company retirement plans. It’s also advisable to take advantage of health savings accounts that can help you reduce your taxes and save for your future. We can help you determine whether you’re on target to reach your retirement goals.

 

VIRTUAL CURRENCY/CRYPTOCURRENCY

Virtual currency transactions are becoming more common. There are many different types of virtual currencies, such as Bitcoin, Ethereum and Ripple. The sale or exchange of virtual currencies, the use of such currencies to pay for goods or services or holding such currencies as an investment generally has tax consequences. We can help you understand those consequences.

 

YEAR-END PLANNING EQUALS FEWER SURPRISES

There are many other opportunities to discuss as year-end approaches. And, many times, there may be strategies such as deferral of income, prepayment of expenses, etc., that can help you save taxes.

Whether it’s working toward retirement or getting answers to your tax and financial questions, we’re here for you. Please contact our office today at 852 2985 8218 to set up your year-end review. As always, planning ahead can help you minimize your tax bill and position you for greater success.

 

Disclaimer: This information has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors or consult us regarding your own personal tax situation as this email was intended to be general in nature.