LOUISVILLE, Ky. — There’s a lot to be mindful of with the most recent tax changes. It spans important matters like stimulus payments, unemployment benefits, and retirement plan withdrawals.
“There’s going to be a little bit of differences just from the different bills that were passed in 2020 with the CARES Act,” said Aaron McAndrew, a financial planner in Louisville.
McAndrew has helped a lot of clients with questions they have for their CPAs as tax filing season is set to begin Jan. 25. With the second round of stimulus checks, McAndrew has helped some of his clients sort what’s what.
“Stimulus money is not taxable. It is not taxable to any of the recipients there,” McAndrew said. "It is based off 2019 tax returns.”
Stimulus checks are not considered income, but rather tax credit. However, unlike stimulus checks, McAndrew says that unemployment benefits are taxable. But the tax rates drop as income does.
“If total tax bracket is lower if you’re not employed anymore can be paying taxes on those at a lower tax bracket,” he said.
A new law has a provision that allows people to make withdrawals up to $100,000.00 of IRA and 401 (k) assets. These withdrawals can be included in taxable income or retired to such accounts over a three year period. Congress also adding a measure that does away with a steep penalty for people who qualify.
"If they are under the age of 59.5, it allowed them to not pay the 10% early withdrawal penalty,” he added.
Some accountants are expecting a shift in people seeking professional aid when it comes to filing in 2021. McAndrew is a financial planner, not a CPA. He said he’s getting his taxes looked at by a professional.
“You’re getting those tax forms to a professional, explain your situation to the professional, if there’s anything that needs to be done that professional will tell you what needs to be done,” said McAndrew.
McAndrew advised that regardless of how you file, make sure to file early.