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Energy Insights – Tax Day 2020

Tips & Tricks:
What To Know for Tax Day 2020

We are only three months into the year, but 2020 is making history for a number of reasons: a pandemic virus, teetering economics, and a postponed summer Olympic season – just to name a few. However, a silver lining amidst these turbulent times would be the announcement that the federal Tax Day has officially been moved from April 15 to July 15. This move gives taxpayers and businesses time to file and make payments without interest or penalties.

Last year’s tax season may have left you pleasantly surprised – or flustered and confused. Regardless, below is a combination of 2020 tax day tips & tricks that can help you utilize this time extension to your full advantage.

The Preparation

In 2019, over 80 million income tax returns were filed with the help of tax professionals – just over half of all received returns.1

If you intend to have someone else handling your taxes and haven’t yet settled on who, a good place to start is your network of friends and relations. Tax preparers must have a preparer tax identification number (PTIN) that authorizes them to prepare federal income tax returns. The IRS has a directory of credential preparers. Who you consider is dependent on your needs – there are different levels of skill, expertise, and education among those authorized to handle tax prep. Fees should be a point of reflection – some firms will collect payment as a percentage of your refund.

It may seem obvious, but after deciding on who you will work with, an appointment needs to be scheduled. A delayed tax filing deadline may be a saving grace for these chaotic times, but as our nation has been witnessing – a lot can happen in 90 days. Set yourself up for success and queue early to avoid last minute stressors.

The Documents

Once you’ve decided on who, you must gather the what. While not an exhaustive list, forms for tax preparation include:

  • W-2: wage and salary income
  • W-2G: gambling winnings (or, if you were fortunate enough to have won the lottery)
  • 1099-B: the sale of stocks, bonds, or other investments
  • 1099-DIV: dividends
  • 1099-INT: Interest income
  • 1099-MISC: self-employment, or other various types of income
  • 1099-Q: distributions from an education savings plan
  • 1099-R: distributions from individual retirement accounts, 401(k) plans, and other types of retirement savings plans
  • SSA-1099: Social Security benefits
  • 1065 (Schedule K-1): income from partnerships, S corporations, estates, or trusts.  If you’re a U.S. Energy investor, you can access your latest Schedule K-1 through our online portal.
  • 1098: mortgage interest
  • 1098-E: student loan interest
  • 1098-MA: homeowner mortgage payments
  • 1098-T: tuition for higher education

Other documents needed for tax prep are bills and receipts you may have incurred in the past year. If the total exceeds the deduction you qualify for, your write off can be greater. They may include:

  • Business expenses (summarized by type and amount)
  • Child care expenses (summarized by provider and amount)
  • Medical expenses
  • Moving expenses
  • Personal property tax, such as car registration paid
  • Realized gain/loss report for any stocks, bonds, mutual funds and other capital investments sold during the year
  • Receipts or acknowledgment letters for gifts to charity
  • Rental expenses (summarized by property, type, and amount)

These documents should have arrived to you in January and February. Note that payments such as investment income from foreign financial accounts and rental income may not be reported on the above-mentioned documents, but still need to be reported.

Additionally, if you are working with someone new, you will need to bring your social security card with you so they can confirm your identity. If you cannot get ahold of that, you may use a copy of your previous year’s tax return – given that it bears your current name, address, and social security number.

Tax Reform Reflections

Even if your financial situation hadn’t changed, the 2019 tax season brought a lot of modifications in the newly reformed tax laws. The full impact of the Tax Cuts and Jobs Act (TCJA) which was passed in late 2017 was found in the details – and there were many details. The most prominent include the altered income tax brackets, the change in the standard deduction, and the variations in many tax credits and deductions. Some tax planning considerations that may not have been realized last year include:

  • The new individual alternative minimum tax (AMT) – which is in effect from Jan. 1, 2018 through Dec. 31, 2025 – rules that married couples filing jointly will be exempt from the AMT starting at $109,400 (it was previously $84,500). For other taxpayers, exemptions begin at $70,300 (not including estates and trusts).
  • Corporate taxes top out at 21%, whereas beforehand it could have gone as high as 35% on taxable income greater than $10MM.
  • Estate taxes also saw a higher threshold for exemption. Estates passed on to heirs that are worth up $11.2MM are exempt from the tax.

In addition to changes, the TCJA also created a myriad of lucrative tax planning opportunities in its wake. If any of the tax situations apply to you, investors are encouraged to speak with their wealth advisor regarding how oil & natural gas direct investments may benefit you:

  • Maximize 20% QBI (Qualified Business Income) Deduction
  • Lost Tax Deductions including: SALT Taxes (State and Local Tax) and Charitable Deductions
  • Defer Capital Gains and Opportunity Zones

It is important to know that although the federal timeline has extended, not every state has followed suit – some have, as of the writing of this article, stuck to the April 15th deadline.

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Important Disclosures
This information contained in this document is for informational purposes only. It does not constitute an offer to sell or a solicitation of an offer to buy any security. Such offers can only be made by a Private Placement Memorandum to accredited investors. Oil and gas investments involve a high degree of risk and are not suitable for all investors. You should purchase these securities only if you can afford a complete loss of your investment. Please refer to the Risk Factors section of any specific Private Placement Memorandum. The equipment pictured in this brochure is not owned by, and will not be owned by U.S. Energy Development Corporation or its partnership(s), unless otherwise noted. The assets pictured within this brochure accurately represent the assets U.S. Energy or its partnerships may own. Please refer to the Areas of Operation section of any specific Private Placement Memorandum.  Past performance is not an indication of future results.   Securities sponsored by U.S. Energy Development Corporation are offered through Westmoreland Capital Corporation (CRD 11469), Member FINRA/SIPC – an affiliate of U.S. Energy Development Corporation.