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In early June, the U.S. Treasury Department released its general explanations of proposed changes to the U.S. tax code.

Please note, the following items have only been proposed. In order to become law, they must pass through both the U.S. House of Representatives and the U.S. Senate.

S.B. 18 will Conform Ohio with Federal Tax Law Changes

Ohio Tax Commissioner Jeff McClain recently announced Ohio is following the federal government and Internal Revenue Service in extending the deadline to file and pay Ohio individual income and school district income taxes for tax year 2020.

The new deadline is May 17, an extension of approximately one month from the original deadline of April 15.

The Treasury Department and Internal Revenue Service announced the federal income tax filing due date for individuals for the 2020 tax year has been pushed to May 17.

The IRS will be providing formal guidance in the coming days. However, individual taxpayers do not need to file any forms or call the IRS to qualify for the new federal tax filing and payment deadline.

Many businesses who received Ohio Bureau of Worker Compensation rebate or dividend checks during 2020 recently received a letter from the Ohio Bureau of Workers Compensation requesting that they provide the BWC a completed Form W-9 to provide the information needed to complete the IRS tax statement Form 1099-G, which reports taxable Government Payments. This action also indicates that these rebate payments could potentially be subject to both Ohio state income tax and Commercial Activity Tax.

The PATH Act accelerated the due date for filing Form 1099 that includes nonemployee compensation (NEC) from February 28 to January 31 and eliminated the automatic 30-day extension for forms that include NEC. Starting with tax year 2020, taxpayers should use Form 1099-NEC to report nonemployee compensation.

Form 1099-NEC replaces the use of box 7 on Form 1099-MISC from previous years. Other uses of 1099-MISC have not changed and will continue to be used for common payments such as rent and payments to an attorney.

On March 18, the Internal Revenue Service provided clarification to special payment relief for individuals and businesses in response to the COVID-19 Outbreak.

For individual returns, income tax payment deadlines with a due date of April 15, 2020, are automatically extended until July 15, 2020, for up to $1 million of their 2019 tax due.

This payment relief applies to all individual returns, including self-employed individuals, and all entities other than C-Corporations, such as trusts or estates. The IRS will automatically provide this relief to taxpayers. Taxpayers do not need to file any additional forms or call the IRS to qualify for this relief.

One of the most common tax-related misconceptions is that filing a tax extension increases your risk of a tax audit. 

This longstanding myth is simply not true, as filing a tax extension can statistically decrease the risk of an audit.

In addition to statistically decreasing the risk of an audit, there is also one other benefit to extending a tax return.

Many individuals may think the time to plan for tax season occurs during the tax season, which occurs after their tax year has ended.

Unfortunately, this is often too late to make any adjustments, which may have benefited the taxpayer.  

Similarly, businesses can also fall into this line of thinking and fail to plan for tax season during their tax year.

The IRS has announced that the contribution limits for Flexible Spending Accounts (FSA) contribution limits have been increased to $2750 for the plan year beginning 2020.

The IRS issued its annual inflation adjustments for key tax items for the tax year 2020. Among them are new amounts for standard deductions.

For the tax year 2020, the standard deduction for a married couple filing jointly will be raised from $24,400 to 24,800. For single taxpayers and married couples filing separately, the standard deduction will be raised from $12,200 to 12,400. For heads of households, the standard deduction will be $18, 650.

Margin tax rates will change as follows: