As you file your 2020 taxes, you might run across some differences from last year’s taxes. Whether these are from personal changes in your life or changes to tax rules and deadlines, it’s important to be aware of them before you file.
Here are some of the major 2020 tax differences you might notice:
2020 Tax Updates: Stimulus Money Claims
As a third stimulus check is delivered to the U.S., there are some people still waiting on their money from one of the first two checks.
There are multiple reasons for this. One big reason is that the IRS used 2019 tax returns to calculate how much you would get for some stimulus checks. If your income was higher in 2019 but you lost income in 2020, you may have not received stimulus money based on your higher income amount.
Also, if you had a baby in 2020, you did not receive dependent stimulus money for that child yet.
Finally, some people didn’t receive their stimulus checks because of simple errors in addresses, account information or other mix-ups.
Whatever the reason, if you think you are owed stimulus money, you can file a standard 1040 form (or 1040-SR if you’re over 65) to receive that money.
Changes to RMDs for IRA Inheritances
If you inherited an IRA from someone who wasn’t your spouse, you now have to take that money out over a 10-year period.
There are strategies to make the most of that money while working within the limits.
If you have a traditional IRA, it might be better to take that money now instead of waiting. For example, you could take 1/10th of the money out each year for tax purposes.
If that money is in a Roth IRA, it’s better to leave it in the account until the 10th year, because you’ll maximize tax-free growth.
Forms and Other Common Questions
Here are a few of the most common questions I’ve received about taxes this year, and their solutions:
I rolled an IRA over to an IRA at another institution, but I didn’t receive a 1099-R. Should I receive one?
That kind of IRA transfer is called a trustee-to-trustee transfer, and most places won’t send out a 1099-R. Most likely you won’t need one. You would be likelier to receive one if you transferred a 401(k) to an IRA.
Are backdoor Roths taxable?
They are not taxable. On your taxes, you would have to file form 8606 and claim those contributions on your IRA as non-deductible.
As a physician, how is on-call income reported?
This would be 1099 income. If you’re maxing out your other retirement accounts but want to contribute to a solo Roth 401(k), you can contribute up to $57,000 if you’re under age 50.
Here are some of my previous tax posts to help simplify your filing process:
Medicare Taxes for High Income Earners
Did You Receive a High Tax Bill?
Get Ahead with a Tax Preparation Checklist
Do you need help preparing for retirement? Contact me today to set up a meeting to talk about your goals. You can also download my free ebook for physicians for tips and information about getting your finances on track.