Looking for a Stress-Free Tax Filing for 2020? No Guarantees, but Try Our Tax Checklist

Ready to start your 2020 tax preparation? Keep these five things in mind and refer to the checklist as you prepare.

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Key Takeaways

  • Prepare for your 2020 filing by getting organized with a checklist
  • Know your deadlines for filing and contributing to retirement accounts
  • Learn how key tax changes for 2020 could impact tax strategy

Let’s face it: 2020 has been a strange year for most Americans. Many would call it a year to forget. But as we flip the calendar to 2021, one thing that we can’t forget about 2020 is that we still have to square up with Uncle Sam.

Yes, the start of the new year means that tax season has begun. So, now’s the time to gather and organize the information you’ll need to get started on your 2020 taxes. And remember: It was a strange year, which also means it has a few unique tax quirks.   

Here are five things to know as you get a jump-start on this year’s tax season. And to help further de-stress tax season, consider using the checklist below to aid in the organization and filing process.

Refer to this handy checklist to help you gather the information you need to prepare your 2020 income tax return.

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1. Key Dates for 2021

There are two big days—the actual tax deadline and extension dates. This year the tax filing deadline is on May 17, a Monday. If you request and receive an extension, your deadline will be Friday, October 15.

The last day to contribute to an Individual Retirement Account (IRA) for 2020 is April 15. The maximum contributions are $6,000 for those under 50 and $7,000 for those over 50. Contributions to a traditional IRA can be deducted against your 2020 taxes. Contributions to a Roth IRA aren’t deductible, but withdrawals, including any gains, will be tax-free.

If you’re trying to decide between a traditional and a Roth IRA, make sure you know the differences.

2. Understand the Changes for 2020

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was passed into law in March 2020, contained a few provisions to help taxpayers this year. You’ll want to consult with your tax advisor for the details, but here’s the gist:  

  • Required minimum distributions (RMDs). The SECURE Act, passed in December 2019, moved the age for RMDs from tax-deferred accounts from 70.5 to 72 for anyone born after June 30, 1949. But the CARES Act has done away with RMDs for the 2020 tax year, which could make for a nice tax gift. Remember: When you take a distribution, you’re essentially declaring it as income, which means you’d need to pay taxes on it. Not this year. If you don’t need the money, you don’t have to take it.  
  • Early withdrawal penalties. Normally, you’d need to be at least 59 1/2 to take penalty-free withdrawals from your accounts. But under the CARES Act, if you, your spouse, or a member of your family has been impacted by coronavirus and you took money out of your tax-deferred account, you may be able sidestep that 10% penalty. Although you’d still need to pay taxes on the proceeds of any withdrawal, a CARES Act provision allows those tax payments to be spread over three years. Again, please consult your tax advisor.  
  • Charitable donations. Do you take the standard deduction? That doesn’t mean you can’t write off charitable contributions. For the 2020 tax year only, individual donors may claim an above-the-line deduction of up to $300 for any qualified charitable cash contribution. The provision was added to the CARES Act as a way to incentivize charitable giving for taxpayers who fall under the standard deduction. There are a few more nuggets from the CARES Act related to charitable giving. Here’s a summary.

3. Forms Are Coming

Keep an eye on your mailbox and inbox. Your employer, investment provider(s), and the government will soon start sending tax forms detailing your activities for the year. For example, you may receive a W-2 form that reflects your wages for 2020 or 1099-DIV that shows your investment income. Use the checklist provided above to help you track the forms you need to complete your return. If you’re a TD Ameritrade client, you can generally access the 1099 for your account online, giving you quick access to the information you need.

4. A Word on Corrected 1099s

You may receive a corrected 1099 form for a number of reasons. They include:

  • Reallocation of income by the issuer (e.g., mutual fund company)
  • A reporting error
  • Receipt of updated information

Corrected forms may be sent as soon as early February and typically continue through September. Investments that often see capital reallocated include mutual funds, regulated investment companies (RICs), and Real Estate Investment Trusts (REITs) because they have so many different investments. Simple equity or options investments, which typically don’t reallocate their income, don’t usually send out corrected forms.

So what happens if you receive a corrected form after you file? You may need to amend your tax return. To help reduce the chance of this occurring, consider waiting to file your taxes. 

5. Your Investment Activities 

If you sold any investments last year and have capital gains or losses to report, you’ll need to file a Schedule D. To complete this schedule, you’ll need to know:

You could keep track of all this information yourself, but if you have a lot of different securities in your account, with a lot of buying and selling, deciphering cost basis can be tricky. TD Ameritrade clients have access to Gainskeeper®, a transaction monitoring and reporting service that will track it all for you.

The Bottom Line

It’s true that tax filing is never going to crack the top 10 list of “favorite things to do in the new year.” But if you take a methodical approach with a tax checklist, you may be able to whittle down the amount of time you spend completing and filing your return.

TD Ameritrade does not provide tax advice. Clients should consult with a tax advisor with regard to their specific tax circumstances.

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Key Takeaways

  • Prepare for your 2020 filing by getting organized with a checklist
  • Know your deadlines for filing and contributing to retirement accounts
  • Learn how key tax changes for 2020 could impact tax strategy

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