Small Business Taxes & ManagementTM--Copyright 2020, A/N Group, Inc.
Life Changes Affect Taxes
Life changes can have significant affects on taxes. Some effects are quickly recognized, some are more subtle. But unless you're aware, they can be a big surprise at tax time. Here's a list of potential changes and potential tax effects.
___ New job? Higher or lower pay? Adjust withholdings.
___ Spouse now working? Adjust withholdings/estimated taxes.
___ Unemployment compensation taxable. Ensure sufficient withholdings federal and state.
___ Marriage? Divorce? Married for full year if married at end. Changes in income, tax brackets.
___ Widowed? If widowed during year, married for full year. File as surviving spouse for two years following death if dependents.
___ Now self-employed? Pay self-employment tax.
___ Lower income? Deductible IRA/Roth IRA now available?
___ Sale of home? Gain in excess of exclusion long-term capital gain; use of $500,000 exclusion for 2 years following death of spouse.
___ Rental of vacation home? Short-term rental of unused portion of principal? Additional income, estimated taxes.
___ Death in family? Income from estate.
___ Birth of child? $2,000 child tax credit annually for child under age 17; credit drops to $500 if still dependent at 17.
___ Adoption of child? Adoption credit; child tax credit; change in filing status.
___ Begin collecting Social Security. Portion taxable depending on income level.
___ Begin distributions from IRA, pension plan, annuity? Income taxable; withholdings.
___ Turn 55? 59-1/2? Exceptions to penalty for distributions from retirement plans, IRAs apply.
___ Turn 70-1/2? May be required to take minimum distributions. Exception for 2020.
___ Caring for elderly or disabled relaitve? Filing status, child/dependent tax credit.
___ Started business? Self-employment tax, additional income/losses.
___ Investing in S corporation? Passthrough of income/losses.
___ Unusual asset sales? (e.g., stamp collection, classic car, land, etc.)
___ Major illness? Medical expenses deductible; itemize vs. standard deduction.
___ Covered by a retirement plan at work now? No longer covered? Contributions to deductible IRA.
___ Asset sales from business?
___ Casualty loss? Deductible only if business related or presidential disaster area.
___ Forgiveness of debt? May be income; exceptions exist.
Copyright 2020 by A/N Group, Inc. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The information is not necessarily a complete summary of all materials on the subject. Copyright is not claimed on material from U.S. Government sources.--ISSN 1089-1536
--Last Update 11/12/20