Q&A: Jim Hamilton Looks Back On – And Beyond – 2020
With a professional career spanning nearly three decades, including five years in the private sector, Weiss partner Jim Hamilton brings an exceptionally deep perspective on matters affecting tax planning, both short and long-term. He sat down recently to discuss how the firm has handled working in the pandemic and what individuals and businesses should be thinking about at the end of the year.
This year was tough for businesses. For starters, how did Weiss handle the pandemic?
Our team came together and has been really successful working remotely. Right now, only those team members who need to be at the office are there. Everyone else is working remotely, and the silver lining is that we have even been able to attract and retain top talent by offering that flexibility. But even remotely, we do everything as a team, and our structured workflow has really guided us. The most important thing is that we’ve been able to maintain the same high standard of client service that Weiss is so well-known for. The strength of our client relationships is everything.
What about your clients? How have they handled the pandemic?
The vast majority of our clients were doing very well at the beginning of 2020. Many were looking at buying equipment, hiring people, and expanding their businesses. Some were even on their way to having record first quarters. Then everything just dropped. March and April were very scary. At first, people thought this would last a few weeks or months, but obviously that hasn’t been the case.
So now our clients are looking at their businesses differently. They want to maintain cash flow, liquidity, and economic viability. They want to make sure they can survive today, and thrive tomorrow.
What about the CARES Act and PPP loans?
They put money in businesses’ hands, which slowed down the decision-making process and allowed people to adapt to the new reality. The good news with PPP loans is that they will likely be forgiven for most businesses. The downside is that businesses were mandated to spend the money, but they cannot deduct their expenses that they paid with it. That could change with legislation. If so, it might make sense for some of our clients to extend their 2020 returns.
We’ve nearly made it through 2020. Do you have any last-minute tax tips for individuals?
One change this year is that individuals can make a charitable cash contribution of $300 and get a deduction for it, even if they don’t itemize. I would also recommend people check their FSA balance to ensure they have spent everything, max out their tax-advantaged savings, like IRAs, make sure they take required minimum distributions, and contribute to their college saving 529 plans. Find more tax tips for individuals here.
What about businesses? What should they be considering right now?
Businesses have several unique considerations this year. If there was a time to take advantage of a loss to reduce a tax obligation or to even possibly force a refund, this is the year to do it. This also might be a good time to defer income and accelerate expenses; the CARES Act allows net operating losses to be carried back five years. We also recommend maximizing your retirement contributions and claiming first year bonus depreciation. This year will also be a big year for home office deductions. Many small businesses will take advantage of that. Read more tax planning tips.
Anything new and interesting from the IRS?
One thing worth noting is the new 1099-NEC tax form for payments from businesses to non-corporate service providers such as independent contractors and freelancers. This represents a long-overdue change from the previous 1099-MISC form, which will still be used to report royalties, prizes, and so on.
What can your clients expect from Weiss for the 2021 tax season?
Our office will continue to work remotely for the time being, and I expect everything to run smoothly. That said, with tax filing dates reverting back to their normal timetables (with corporate returns due March 15 and individual returns due April 15) and the ongoing uncertainty of the pandemic, it’s more important than ever for our clients to get their information in to us as early as possible.
What tax changes will the new administration bring?
At this point, it’s still too early to tell. I do think the SALT (state and local tax) deduction limit might end up back on the table. We also expect the federal tax rate and the Illinois state tax rate to go up in the next few years, although perhaps not immediately. But longer term, much will depend on the makeup of Congress and the legislature, and obviously on the course of the pandemic.
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