Number four – “My neighbor/friend got a big refund, how come I didn’t?”
Every tax return is a unique result for every taxpayer’s situation. Filing status, income, exemptions, deductions…. all these are different for everyone. So, trying to compare your refund (which, after all, is only one number on the return) to another’s is quite impossible. You should be comparing your tax return to your 2019 return, or projecting into 2020.
Number three – “Since the standard deduction has doubled, I am losing my deductions”
We saw a lot of confusion in this area this year…especially from those normally itemize their deductions. When it comes to deductions, you always take the highest number…so you didn’t lose your deduction, you are taking a higher one! Additionally, if you are over 70 ½ and have an IRA, there is way to make a charitable deduction on top of your standard deduction…just ask us how.
Tax Season Myths...Number two – “My refund was less than last year, so I paid more taxes”.
In very simple terms, the amount of your refund is your taxes paid or withheld + tax credits MINUS your tax liability. Many taxpayers saw a reduction in their tax withheld from their paychecks due to the new tax law (more money in their pockets every payday!). However, many of these taxpayers also saw a reduction in their tax liability, as well. If your income was about the same, compare the “Total Tax” lines (not refund) on both returns.
Every year, when we talk to clients about their taxes, we often hear misconceptions and misunderstandings about tax law. In a 6-part series, here are our 2019 top 5 “tax season myths” …
Number one – “I sold my rental property for a loss”.
Losses on sales of rental properties are unusual…mainly because you are taking a depreciation deduction every year against rental income. This deduction lowers the cost basis of your property each year and makes it much more likely to have gain on the sale as opposed to a loss. Before you sell, make sure you know your cost basis and resulting gain on the sale. We also recommend performing a full tax projection for the following year so you can plan for your tax liability.
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IR-2020-185: IRS: Unemployment compensation is taxable; Have tax withheld now and avoid a tax-time surprise
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IR-2020-172: IRS: New law provides relief for eligible taxpayers who need funds from IRAs and other retirement plans
Second year in a row...thank you for everyone who voted!
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Check out Randy Jones, CPA, Jones, CPA & Associates, PA.
Number six – “Do I really need to file?”
A common misunderstanding some people have is that they don’t need to file a return when they reach a certain age. There is no such rule. Everyone needs to file if they meet the income filing requirements. Keep in mind you may even need someone else to file your final tax return after you pass away.
I have the Best Clients!
As you may have seen in the Record, I was voted BY YOU as the Best CPA in St Augustine. I wanted to take a moment to thank you for your vote. I have always strived to give excellent service to my clients, and this victory is direct assurance that I am meeting this goal.
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Thank you so much for your vote, and, as always, I am here for you if you have any concerns.
Regards,
Randy
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Tax Tip 2020-139: Taxpayers who need last year’s tax return have several options
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Second phase of St. Johns County small businesses recovery program launches Monday
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IR-2021-04: Eligible Paycheck Protection Program expenses now deductible
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IR-2020-264: Special $300 tax deduction helps most people give to charity this year – even if they don’t itemize
