Recovery Rebate Credit

 Many of you received a stimulus check earlier this year. What you received was an advance based on your 2018 or 2019 adjusted gross income. The recovery rebate credit will be based on your 2020 adjusted gross income. The CARES Act provided for a stimulus check of $1,200 for individuals, or $2,400 for joint returns and $500 per child under age 17. The credit is phased out at the rate of 5% of adjusted gross income over $150,000 for joint returns and over $75,000 for individual returns. If you received too much advance stimulus, you will not have to pay it back on the 2020 tax return. If you didn't receive enough, you will get a credit against your 2020 taxes. Tutto bene.

Charitable Contributions in 2020

The Cares Act which was signed into law this year has created a new incentive for charitable giving. Taxpayers can deduct up to $300 in cash contributions even if they don't itemize. This is the limit for both single and joint returns. If you do itemize, the limit on cash contributions to public charities (501c3) has been increased from 60% of adjusted gross income to 100% of adjusted gross income. So this is the year to make that large cash donation. Donor advised fund contributions do not qualify for this. 

October 15

 October 15 marks the deadline for individual tax returns for 2019. One of the larger taxpayer penalties is the failure to file penalty if you don't get your tax return filed by the deadline. The penalty is 5% of the unpaid taxes each month or part of a month that the return is late up to a maximum of 25% of the unpaid amount. There is no penalty if no tax is due. 

Business Mileage

Business Use of a Car:

You have to document your business miles for the IRS in order to take a tax deduction. Documentation can be provided by a mileage log, an account book, diary, trip sheets, expense reports, or other similar evidence. I use the mileage record in Quickbooks for my business. You can buy a mileage log at an office supply store, and there are also many aps now that you can get. The Cohan rule that allows taxpayers to estimate some business expenses is not allowable for business mileage. Commuting between your home and your regular work location is not business mileage. 

Upon audit, the IRS will just throw out an estimate of business mileage without supporting documentation. A contemporaneous written record is the best defense showing the specifics of date, mileage and business purpose.