Most taxpayers can deduct up to $300 in charitable contributions without itemizing deductions

COVID Tax Tip 2020-170, December 14, 2020

Following tax law changes, cash donations of up to $300 made this year by December 31, 2020 are now deductible without having to itemize when people file their taxes in 2021.

The Coronavirus Aid, Relief and Economic Security Act includes several temporary tax law changes to help charities. This includes the special $300 deduction designed especially for people who choose to take the standard deduction, rather than itemizing their deductions.

This change allows individual taxpayers to claim a deduction of up to $300 for cash donations made to charity during 2020. This deduction lowers both adjusted gross income and taxable income – translating into tax savings for those making donations to qualifying tax-exempt organizations.

Before making a donation, taxpayers should check the Tax Exempt Organization Search tool on IRS.gov to make sure the organization is eligible for tax deductible donations.

Cash donations include those made by check, credit card or debit card. They don’t include securities, household items or other property. Though cash contributions to most charitable organizations qualify, some don’t. People should review Publication 526, Charitable Contributions for details. Cash contributions made to supporting organizations are not tax deductible.

The CARES Act includes other temporary allowances designed to help charities. These include higher charitable contribution limits for corporations, individuals who itemize their deductions and businesses that give food inventory to food banks and other eligible charities. For more information, visit the Coronavirus Tax Relief page of IRS.gov.

By law, recordkeeping rules apply to any taxpayer claiming a charitable contribution deduction. Usually, this includes getting a receipt or acknowledgement letter from the charity before filing a return and retaining a cancelled check or credit card receipt.

Itemizing Deductions Article

Most taxpayers can deduct up to $300 in charitable contributions without itemizing deductions

New things taxpayers should consider as they get ready to file taxes in 2021

COVID Tax Tip 2020-172, December 16, 2020

When people get ready to file their federal tax return there are new things to consider when it comes to which credits to claim and what deductions to take. These things can affect the size of any refund the taxpayer may receive.

Here are some new key things people should consider when filing their 2020 tax return.

Recovery rebate credit

Taxpayers may be able to claim the recovery rebate credit if they met the eligibility requirements in 2020 and one of the following applies to them:

  • They didn’t receive an Economic Impact Payment in 2020.
  • They are single and their payment was less than $1,200.
  • They are married, filed jointly for 2018 or 2019 and their payment was less than $2,400.
  • They didn’t receive $500 for each qualifying child.

Refund interest payment

People who received a federal tax refund in 2020 may have been paid interest. The IRS sent interest payments to individual taxpayers who timely filed their 2019 federal income tax returns and received refunds. Most interest payments were received separately from tax refunds. Interest payments are taxable and must be reported on 2020 federal income tax returns. In January 2021, the IRS will send a Form 1099-INT, Interest Income, to anyone who received interest of at least $10.

New charitable deduction allowance

New this year, taxpayers who don’t itemize deductions can take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations. For more information, people should review Publication 526, Charitable Contributions.

Other refund-related reminders

  • Taxpayers shouldn’t rely on receiving a refund by a certain date, especially when making major purchases or paying bills. Some tax returns may require additional review and processing may take longer.
  • Refunds for taxpayers claiming the earned income tax credit or additional child tax credit can’t be issued before mid-February. This applies to the entire refund, not just the portion associated with this credit.
  • The fastest and most secure way to receive a refund is to combine direct deposit with electronic filing, including the IRS Free File program. Taxpayers can track the status of their refund using the Where’s My Refund? tool.

Things to Consider Article

Tax filing season to start Feb. 12

Tax filing season to start Feb. 12, IRS announces

By Alistair M. Nevius, J.D.

2 hours 28 minutes ago

 

The IRS on Friday announced that it will start accepting and processing 2020 tax returns on Friday, Feb. 12. This is later than in most previous years, when tax season has started in January. The IRS says the delay is due to the extra time it needs for programming and testing its systems following the tax law changes made by the Consolidated Appropriations Act, 2021 (CAA 2021), P.L. 116-260, which was enacted Dec. 27.

According to the IRS, much of the additional programming stems from the second round of recovery rebate credits authorized by the CAA 2021, which taxpayers can claim on their 2020 returns if they do not receive an economic impact payment.

The IRS anticipates starting to issue refunds for taxpayers who claim the earned income tax credit and/or additional child tax credit in the first week of March, for taxpayers who file electronically and provide direct deposit information and have no other issues with their returns.

The IRS says it expects more than 150 million tax returns to be filed this year.

Friday was also the day that IRS Free File products became available for the year. Taxpayers who qualify can use Free File to prepare their returns now. The IRS will then hold the completed returns until it starts processing returns on Feb. 12. MilTax returns — tax services for the military offered through the Department of Defense — will be available starting Jan. 19.

— Alistair M. Nevius, J.D., (Alistair.Nevius@aicpa-cima.com) is the JofA’s editor in chief, tax.