TAX+BUSINESS
ALERT
News for your business and your life.
| Hawkins Ash CPAs
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In this Edition
July 7, 2020
Charitable Giving in a Time of Crisis
PODCAST: Preparing for the Tax Filing Deadline: Things that You Can Still Do Before July 15, 2020!
Tax Calendar
Installment Sales May Attract Property Buyers
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Charitable Giving in a Time of Crisis
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The sudden and severe impact of the novel coronavirus (COVID-19) pandemic has created much financial stress, but the crisis also has generated an intense need for charitable action. If you’re able to continue donating during this difficult period, the Coronavirus Aid, Relief, and Economic Security (CARES) Act may make it a little easier for you to do so, whether you’re a small or large donor.
Tax Benefits
From an income tax perspective, the CARES Act has expanded charitable contribution deductions. Individual taxpayers who don’t itemize can take advantage of a new above-the-line $300 deduction for cash contributions to qualified charities in 2020. “Above-the-line” means the deduction reduces adjusted gross income (AGI). You can take this in addition to your standard deduction.
For larger donors, the CARES Act has eased the limitation on charitable deductions for cash contributions made to public charities in 2020, boosting it from 60 percent to 100 percent of AGI. There’s no requirement that your contributions be related to COVID-19.
Careful Steps
To be able to claim a donation deduction, whatever the size, you need to ensure you’re giving to a qualified charity. You can check a charity’s eligibility to receive tax-deductible contributions by visiting the IRS’
Tax-Exempt Organization Search.
If you’re making a large gift, it’s a good idea to do additional research on the charities you’re considering so you can make sure they use their funds efficiently and effectively. The IRS tool provides access to detailed financial information about charitable organizations, such as Form 990 information returns and IRS determination letters.
Even if a charity is financially sound when you make a gift, there’s no guarantee it won’t suffer financial distress, file for bankruptcy protection or even cease operations down the road. The last thing you likely want is for a charity to use your gifts to pay off its creditors or for a purpose unrelated to the mission that inspired you to give in the first place.
One way to manage these risks is to restrict the use of your gift. For example, you might limit the use to assisting a specific constituency or funding medical research. These restrictions can be documented in a written gift or endowment fund agreement.
Generous Impact
Indeed, charitable giving is more important than ever.
Contact our firm for help allocating funds for a donation and understanding the tax impact of your generosity.
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Contact:
Dianna Streed, CPA, CGMA
Phone: 507.453.5967
Email: dstreed@hawkinsashcpas.com
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PODCAST:
Preparing for the Tax Filing Deadline: Things that You Can Still Do Before July 15, 2020!
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As we get closer to the July 15 tax filing deadline, there are still a number of things that can you can do to reduce your 2019 taxes, including contributing to IRAs, other retirement plans and Health Savings Accounts (HSAs). Listen in to find out more about these and other provisions extended by the IRS and the states.
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This calendar notes important tax deadlines for the third quarter of 2020.
Note: It’s possible some of these due dates could be postponed (or postponed again).
Contact our firm
for the latest information.
July 15*
Due date (without extension) for the following:
- 2019 individual income tax payments and return filing on Form 1040.
- 2019 calendar-year corporate income tax payments and return filing on Form 1120.
- 2019 estate and trust income tax payments and return filing on Form 1041.
- 2019 calendar-year exempt organization return filing on Forms 990 or 990PF and business income tax and other payments and return filings on Form 990-T.
- 2020 first and second quarter quarterly estimated income tax payments calculated on or submitted with Form 1040-ES (“Estimated Tax for Individuals”), Form 1041-ES (“Estimated Income Tax for Estates and Trusts”) and Form 1120-W (“Estimated Tax for Corporations”).
- If the monthly deposit rule applies, employers must deposit the tax for payments in June for Social Security, Medicare, withheld income tax and nonpayroll withholding.**
July 31
The second quarter Form 941 (“Employer’s Quarterly Federal Tax Return”) is due. If you deposited the tax for the quarter in full and on time, you have until Aug. 12 to file the return.
August 17
If the monthly deposit rule applies, employers must deposit the tax for payments in July for Social Security, Medicare, withheld income tax and nonpayroll withholding.**
September 15
Third quarter estimated tax payments are due for individuals, trusts and calendar-year corporations.
- If an extension was obtained, partnerships should file their 2019 Form 1065 by this date.
- If an extension was obtained, calendar-year S corporations should file their 2019 Form 1120S by this date.
- If the monthly deposit rule applies, employers must deposit the tax for payments in August for Social Security, Medicare, withheld income tax and nonpayroll withholding.**
September 30
Calendar-year estates and trusts on extension must file their 2019 Form 1041.
* This list is
not
all-inclusive. See IRS Notice 2020-23, 2020-18 IRB 742 for more information.
** Any payroll taxes that are being deferred under the CARES Act or used as an advance payment for certain COVID-19-related credits don’t have to be made.
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Installment Sales May Attract Property Buyers
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Because of this year’s unforeseen economic slowdown, many businesses and individuals are unexpectedly looking for liquidity. One way to raise cash is to sell off real property such as land or a building. Finding a buyer may not be easy, but an installment sale might help.
An installment sale occurs when you transfer property in exchange for a promissory note and receive at least one payment after the tax year of the sale. Doing so allows you to receive interest on the full amount of the promissory note, commensurate with the installment payments received, often at a higher rate than you could earn from other investments—all while deferring taxes and improving cash flow.
An installment sale may appeal to buyers in today’s environment because, rather than having to pay for the property all at once, they can pay in installments. After all, even people or entities in a position to buy may wish to carefully manage their cash flow. This does present a risk for you, the seller: A buyer may not make all payments, and you may have to deal with foreclosure.
You generally must report an installment sale on your tax return under the “installment method.” Each installment payment typically consists of
interest income,
return of your adjusted basis in the property and
gain on the sale. For each tax year in which you receive an installment payment, you must report as income the interest and gain components.
Calculating taxable gain involves multiplying the amount of payments received in the tax year, excluding interest, by the gross profit ratio for the sale. This isn’t a simple calculation, so be sure to obtain professional assistance when reporting an installment sale to the IRS.
We’d be happy to help you decide whether one of these transactions is right for you and, if so, carry out and report the sale.
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Contact:
Curt Bach, CPA
Direct: 715.748.1351
Email: cbach@hawkinsashcpas.com
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More Resources from CPA-HQ
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The Gig Economy and You
Today, people working in the gig economy (or "side hustle") are doing more than just getting that traditional second job. They are self-employed, for the most part, and all of that income still has to be reported on a tax return. This podcast explains why.
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Heed the Lessons of Your Tax Return and Check Your Withholding
Every year’s tax return provides valuable lessons on the optimal amount that taxpayers should have withheld from their paychecks. Find out how the Tax Cuts and Jobs Act (TCJA) affects this and what may prompt one to make changes.
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What to Do If a Deceased Family Member Received a COVID-19 Stimulus Check
This article describes how to return the payment if a deceased family member received a $1,200 Economic Impact Payment (EIP) stimulus check in error.
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Part of your business. Part of your life. | www.HawkinsAshCPAs.com
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