Never too late: Top year-end tax tips

December 28, 2020 6:36 PM

As we're all aware, 2020 has been an extraordinarily complex year — and as is often the case, that complexity is reflected in taxpayers' tax situations, whether they're businesses or individuals. While there is plenty of time before this year's tax returns need to be filed, the constantly changing economic situation, the presidential election, and the host of COVID-19 legislative provisions mean that some tax moves will only be effective if they're made before the end of the year.

While there's only a few days left in 2020, we've brought together some of our best year-end tax-planning coverage, ranging from reminders of classic strategies to deep dives into rules specific to COVID-19 tax relief. For each article, we've highlighted a strategy or two, but they all offer a host of potential tax savings — for those who act fast.

For businesses and individuals

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In early October, Top 10 Firm Grant Thornton put together this list, a mix of strategies for both companies and invidual taxpayers, including:
— Making sure to use the above-the-line charitable deduction;
— Accelerating AMT refunds; and,
— Taking advantage of new bonus depreciation rules from the CARES Act.

New for the end of the year

A printout of Congress's tax reform bill, "The Tax Cuts and Jobs Act," alongside a stack of income tax regulations

In an interview, Wolters Kluwer's Mark Luscombe dives into some of the most important new year-end planning issues, including:
— Employee tax credits and deferrals related to payroll taxes that expire at the end of 2020;
— Tax provisions that offer retroactive relief; and,
— The impending expiration of the expanded ability to make penalty-free withdrawals from retirement plans.

Expiring relief

With a number of COVID-19-related tax relief provisions tied to 2020, Laura Davison of Bloomberg News talks about how year-end planning has been turbocharged in this article. Among the provisions that are set to expire:
— The removal of the cap on individuals' business loss deductions; and,
— The one-time deduction for charitable gifts for taxpayers taking the standard deduction.

Planning around the election

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Tax planners knew all year long that the November presidential election could have a major impact on year-end planning, particularly if a Biden win brought in a whole new approach to tax legislation, but then the election left control of the Senate up in the air, dependent on the outcome of two early-January races in Georgia.

With that in mind, Accounting Today columnist Mark Luscombe, of Wolters Kluwer, offered strategies for both possible outcomes in Georgia, including:
— With a Republic win, focusing more on tax-loss harvesting and less on Roth IRA conversions; or,
— With a Democratic win, preparing for the possibility of higher capital gains and income tax rates.

Three-quarters of the way there

Coronavirus mask billboard in Times Square

ANGELA WEISS/Photographer: ANGELA WEISS/AFP

In a column from just before the election, Wolters Kluwer's Mark Luscombe summarized the year-end planning developments thus far in the year, including:
— The restoration of NOL carrybacks for up to five years;
— A number of coronavirus-related corrections and extensions to the Tax Cuts and Jobs Act of 2017; and,
— COVID-19 sick leave and family leave, and employee retnetion provisions.

From one year to another

Not everything can be wrapped up by the end of the year, of course, which is why this article, written in mid-December by Accounting Today's senior tax editor, Roger Russell, covers the issues from 2020 that will have an impact in 2021, including:
— The tax impacts of remote work;
— How to handle emergency retirement plan withdrawals under the CARES Act; and,
— The taxability of unemployment benefits.

In under the wire

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While many of them don't need to be taken up by Dec. 31, the last-minute coronavirus-relief legislation signed by President Trump just after Christmas included a number of tax provisions, including:
— Passage of a number of tax extenders;
— An extension of the Work Opportunity Tax Credit; and,
— Improvements to the Employee Retention Credit.