Marcum 2021 Year-End Tax Guide

2021 TAX REMINDERS In addition to what was discussed above, the following impact 2021: Required Minimum Distributions: RMDs must be made for 2021. RMDs were suspended for 2020 without a penalty, but this was only allowed for a single year. A taxpayer who is at least 72 years old by the end of the tax year is required to take an RMD for 2021. Failure to take the RMD can cause a penalty of 50% on the amount not distributed. Charitable Contributions: Individual taxpayers are allowed a deduction for cash contributions to public charities up to 100% of Adjusted Gross Income. The 60% AGI limitation does not apply for 2021 to cash contributions. Donations to donor-advised funds and private foundations are not eligible for the increased limit. Additionally, in 2020, taxpayers who did not itemize were allowed an above-the-line deduction of $300 for certain cash contributions. This deduction for 2020 was per return and this rule limited the deduction to $300 for joint filers. For 2021, the same deduction is permitted, but the $300 deduction is allowed per person, which means that a married couple can deduct up to $600 above the line for a qualifying deduction on a joint return. Consideration should be given to whether non-cash contributions (e.g., marketable securities) can produce better tax results than cash contributions. Net Operating Losses: The TCJA rule that limits the use of net operating loss carryovers to 80% of current year taxable income (before considering these losses) was suspended for 2018, 2019, and 2020. However, the 80% limit is scheduled to apply again in 2021 for losses carried over from post-2017 tax years. This includes losses generated in 2018-2020. CONCLUSION A lot has happened this year and more is on the horizon. Many laws are still unsettled, which makes it difficult to recommend an exact course of action for a particular factual situation. Marcum will continue to keep you updated on new developments throughout 2022 and beyond.

The Service is also requiring additional reporting for 2021 for S corporations through a proposed Form 7203 which would provide information on the tax basis of stock and debt held by shareholders. The most public discussion on IRS enforcement involved proposals to impose on banks more extensive reporting requirements on banks. The Treasury Department initially proposed that the Build Back Better Act should include such reporting requirements with respect to all accounts with at least $600 passing through them. Even when this was raised to $10,000, this would still likely include most of the public who have bank accounts. This bill was ultimately removed from the Build Better Back Act, though there are additional funds for increased IRS enforcement that are tailored to the wealthy.

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