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Unemployment Compensation 2020 Taxation

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Unemployment Compensation in 2020

On March 11, 2021 the American Rescue Plan Act of 2021 was enacted.

One of the provisions excludes up to $10,200 of unemployment compensation paid in 2020 for those with adjusted gross income (AGI) less than $150,000.

As this law was enacted during the tax filing season, the anticipated time until the IRS and software providers can make updates is late May 2021.

At this time the IRS is requesting that taxpayers do not file amended returns as they are still determining guidance on how best to accommodate

taxpayers who have already filed returns.

The IRS is considering automatically correcting returns filed with unemployment compensation without any need for amendments.

02-18-21 IRS behind in Processing 11 million 2019 returns!

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A group of Republicans on the House Ways and Means Oversight Subcommittee sent a letter Wednesday 02.18.21 to IRS Commissioner Charles Rettig complaining about the backlog of approximately 11 million unprocessed tax returns from the 2019 tax year. The backlog of unprocessed mail from the pandemic has created a ripple effect that’s continuing into this year’s tax-filing season, which opened last Friday.

The problem isn’t only with the mail, which piled up last year in trailers outside IRS facilities until IRS employees could return to their offices and open it. While most of the millions of pieces of mail have reportedly been opened, much of it remains unprocessed. That’s causing headaches for taxpayers and tax professionals alike, who are coping with past due notices sent automatically by IRS computer systems, even when payments were sent months ago, according to the investigative news site ProPublica. Taxpayers have had trouble with receiving their Economic Impact Payments from last year and are also having trouble reaching the IRS by phone this year, with the agency continuing to be understaffed due to the pandemic and budget cuts in past years.

LLC ROADMAP (Operating Business with Rental Activity)

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 ACCOUNTING (You have TWO businesses)

• The bookstore or contracting business (example) is an operating business. Keep revenue and expenses separate from the rental business. This does not mean a separate checking account but it may be easier to maintain records. That is up to you.
 
o The bottom line profit is taxable for income and self-employment tax.
 
• The rental part is called a passive activity. Keep revenue and expenses separate from the bookstore.

o The bottom line profit is taxable for income tax but NOT self-employment.
 

PAYMENTS TO MEMBERS

1. Just take it. That is called a DRAW. Partners are NOT required (unlike a corporation) to DRAW according to ownership percentage. The DRAW itself is not a taxable event. The members (that’s what partners are called in an LLC – members) are taxed on the bottom line profit whether they take it (DRAW) or not.
 
2. There are NO W2 wages in partnership accounting.
 
3. If partners/members are being paid the equivalent of wages, that is called a GUARANTEED PAYMENT. That amount is deducted by the LLC as an expense. It is income taxed and self-employment taxed to the partner/member receiving the GUARANTEED PAYMENT.
 

SUMMARY

• Payment for services would be a GUARANTEED PAYMENT. Deductible by the LLC and taxable to the recipient.

• Just taking money (DRAW) is not in itself a taxable event, it is just money being transferred. The LLC does not receive a tax deduction.
 
 

2020 Efile Personal Tax Start Date is Feb 12, 2021

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The opening day for filing 2020 individual returns electronically is scheduled for Monday, February 12, 2021, see IR-2021-16, which explains the February 12, 2021 start date for individual tax return filers allows the IRS time to do additional programming and testing of IRS systems following the December 27, 2020 Consolidated Appropriations Act (H.R. 133) tax law changes that provided a second round of Economic Impact Payments (EIP 2) and other benefits.

IRS Commissioner-BACKLOG of UNOPENED

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November 20, 2020
Currently, the IRS has approximately three million pieces of mail and one million returns that remain unprocessed, IRS Commissioner Charles “Chuck” Rettig said. The IRS mail backlog is down from where it sat at over five million last month.
Testifying before the House Ways and Means Oversight Subcommittee on November 20, Rettig told lawmakers that the IRS is “doing everything we can to reduce this [mail] backlog.” To that end, Rettig also detailed relief being provided for taxpayers who have sent the IRS mail that remained unopened for a certain period of time.
For more detail 

Read NSA's article here.