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November 2020

Tax Insights – November 2020 Rita Bhayani

Tax Checkup
Do you know how much your taxes are going to be next year? Does your refund or balance due always come as a
surprise? I can help you avoid any uncertainty. There are several ways to help manage your refund or balance due:
• Change your adjusted gross income (AGI). By contributing to an IRA or HSA with after-tax dollars, you
may be able to decrease your AGI so that you can qualify for certain credits. In 2020, there is an additional
adjustment available. Up to $300 in cash charitable gifts can be taken as an adjustment to income. This means
you can get a small charitable deduction even if you don’t itemize.
• Change your withholding. On your W-4, you can withhold extra amounts to manage your refund or
balance due.
• Make an estimated tax payment. You can incur underpayment penalties and interest if your balance due
is $1,000 or more. If you anticipate that your total balance due is at least $1,000, you can make an estimated tax
payment before January 15 to minimize or eliminate penalties and interest.
• Change the timing on your charitable gifts. Your itemized deductions may be about the same as your
standard deduction. By either bunching gifts before the end of the year or waiting until after January 1, you can
maximize your benefit from those contributions.
Example: June and Ward generally have $21,800 in itemized deductions other than charitable gifts. They usually
make donations of $2,000 at the end of the year. If they make these donations in 2020, they’ll have itemized
deductions of $23,800 in 2020, and $23,800 in 2021. If they make the donations in 2021, their standard deduction
in 2020 is $24,800, and their itemized deduction in 2021 is $25,800.
Why is this important? By managing your refund or balance due, you can avoid penalties for underpayment of
taxes while keeping as much of your paycheck in your pocket as possible.
Tax Notes
Remember, the IRS will never initiate a collection effort with a phone call. In addition, collection efforts do not begin
with a collection agency. Collection efforts begin with a letter, and only after the taxpayer fails to comply will the
IRS turn the debt over to a collection agency. If you receive a call, and aren’t sure whether it’s on the level, contact
my office so we can create a plan.
Did You Know?
The Leonid meteor shower will peak on the night of November 16/17. This year, it coincides with a new moon on
November 15, so the sky should be as dark as it gets in your area. In the hours before dawn, you’ll be able to see
up to 10–15 meteors per hour.
Quote Corner
“Almost everything will work again if you unplug it for a few minutes,
including you.”

~ Ann Lamott
Suchit Bhayani,
Jan 19, 2021, 5:51 PM