Things to Take Advantage of if You Delayed Your 2019 Tax Filing Until July 2020
- May 22, 2020
- Tax Strategies
As part of its March 2020 coronavirus response, the federal government gave tax filers 90 extra days to pay their 2019 income taxes, allowing taxpayers to delay filing their 2019 taxes until July 15, 2020. If you have not filed your taxes yet, there are a few surprising taxable items as well as some extended tax breaks that you may be able to take advantage of this year. Will you end up heads or tails at the end of filing season?
Four Surprising Types of Taxable Income: With tax season upon us, it is important to evaluate all sources of income that could potentially be taxable.
The following are four things you might not realize are taxable:
- Certain types of college scholarships may be taxed. Scholarships that cover tuition, books and fees are not taxable. However, scholarships that pay for room, board, travel, and other expenses may be taxed. If they are taxed, you should receive a 1099 from the college or university that gave the scholarship.
- Gambling winnings are taxable. Winnings from a lottery, casino, horse gambling, sports betting, etc. are taxable winnings. These are taxable even if you do not receive a W2-G form. If you won several thousand or more, you’ll likely receive a W2-G. However, you are required by the tax code to record any winnings from gambling even if you won’t receive the W2-G form.
- Gifts from an employer. If you are given a gift to recognize you for a job well done or are given a gift to persuade you to reject a competitor’s offer, you will owe taxes on that amount. The Supreme Court has ruled that gifts from employers can be excluded from the employee’s income if it has been made out of “detached or disinterested generosity.” This is almost like if they give you a gift as a friend. Gifts that financially reward you or promote the company do not fall into the category. There are some gray areas.
- Cancelled Debt can be taxed. If you have debt forgiven by a credit card company and they say you don’t have to pay off the rest of your balance, the amount you owed is generally treated as taxable income. This includes credit card bills, car loans, mortgages, or any other type of debt. Exceptions can be some types of student loans and a category of qualified farm indebtedness.
A Few Tax Breaks: In late 2019, tax breaks were extended under the Tax Payer Certainty and Disaster Act of 2019. It resurrects and/or extends certain tax breaks.
- Allows you to deduct your medical expenses that exceed 7.5% of AGI in 2019 and 2020
- Extended mortgage insurance premium write-off through 2020 on qualifying policies issued after 12/31/16
- Prior to the new legislation, the deduction for qualified mortgage insurance on debt to acquire, construct, or improve a first or second resident was only available for premiums paid through 2017.
- Now it is extended to cover premiums paid in 2019 and 2020.
- If you qualify, meet with your tax professional to see whether it is worth the preparation cost to file an amended return.
Tax planning is a critical part of a financial plan and is how you structure everything you do now and into your future. The financial decisions you make throughout the year can potentially impact the taxes you owe the next year. It is important to be following changes in the tax code because it can lead to opportunities and challenges.