Rapidly approaching tax filing deadlines inspire many to vow that we’re finally going to organize that bottomless shoe box of receipts and documents that we will “get to later”. One of the many questions we’ve been getting this year is what documentation should I retain and how can I prepare for next year’s taxes? Tax planning is always important, but with the financial impact that this year’s pandemic may have imposed, you should prepare now to minimize your tax liability and/or maximize your savings from the new tax rules?
With the extension being moved to July 15th, we now have less time to prepare for next tax season. We want to make it easier for you by helping you understand what should be kept, in what format and for how long. Then, you will be able to set up a system to organize your records.
Documentation from COVID-19 for Your Tax Appointment
With the current state of the pandemic, we’ll start off with the information you should be prepared to discuss with your CPA based on economic assistance you may have received. This will include conversation around:
- PPP Loan applications (Retain all SBA forms)
- Keep in mind that you have 24 Weeks to spend your loan money and to qualify for forgiveness
- Also remember that August 8th is the application deadline which gives you to December to spend and apply for loan forgiveness.
- Hold off on application for forgiveness (form 3508) until further guidance is issued which may take us out into 2021
- EIDL Loan Applications (Again, retain all SBA Forms)
- Make sure your records adequately represent those loans
- For our friends in agriculture, retain your CFAP loan applications
- Receipts from charitable contributions
- There is a charitable giving deduction of $300 per taxpayer in the coronavirus relief package passed in late March, even if you don’t itemize. And if you’re receiving unemployment benefits or working in a different state during the pandemic, save documents related to those situations.
- 2018, 2019 and 2020 NOL – Talk to your preparer about opening up 2018 and 2019 for the 5 year NOL Carryback
- If you are going to have a loss, do tax planning… If the loss isn’t great enough to provide tax benefit, may be able to plan to make the loss bigger to potentially maximize your tax benefit.
- SECURE Act
- This act pushed back the age at which retirement plan participants need to take required minimum distributions (RMDs), from 70½ to 72, for those who are not 70½ by the end of 2019. Because of COVID-19, if you were already taking RMD at 70.5, you can pay them back and wait until you are 72. If you weren’t taking RMDs, you can wait till 72 and waive distributions for 2020. It’s important to ensure the waiver is filed with the custodian.
Apart from the new documentation you will be asked to provide for next year’s taxes, the following sections are for items you will need longer-term.
Documents You Should Keep for ALL Tax Appointments:
This has not changed at all and will likely remain the same for years to come.
- Birth, adoption and death certificates.
- Marriage certificates and divorce decrees.
- Social Security cards.
- Military service and discharge records.
Documents You May Need for Many Years:
- Property deeds and vehicle titles (until the property is sold)
- Records of home purchase, improvements and expenses, usually until three years after a property exchange transaction.
- Current insurance policies and business licenses
- Current will and trust documents, and retirement benefit information
Documents You Will Need to Save for Three Years After Filing:
- Investment information, including when you bought and what you paid
- Medical expense documentation, including health spending accounts
- Business-related receipts
- Receipts for charitable contributions
Organizing your documents will not only make next tax season easier, it will help ensure you or someone you trust can access documents when needed. We ask that you complete the organizer that is sent to you by your CPA in it’s entirety. If you don’t know if something applies to you or your business, make a note for your preparer so that it can be discussed. With all of the changes that have happened, we need to make sure you are maximizing your tax opportunities.
Contact our experts today if you have any questions as it relates to planning for 2020 taxes.