Maeda Palius
September 30, 2020

2020 Mid-Year Tax Planning Letter for Individuals

To Our Clients and Friends:

We hope that you and your loved ones are safe as you continue to deal with the current COVID-19 crisis. What an incredibly difficult year this has been! This most recent tax season was unlike any we have ever experienced. While it may seem odd to discuss 2020 mid-year planning while we are still wrapping up the filing of 2019 tax returns, there are many opportunities that should be addressed sooner rather than later.

In response to the COVID-19 emergency, Congress and the President passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act is a massive piece of legislation aimed at providing much needed relief during an uncertain time in our country. Among its many provisions, the Act offers some immediate tax-saving opportunities. We will highlight planning techniques stemming from the CARES Act as well as other recent bills, along with other mid-year planning ideas.

It is possible that additional COVID-19-related tax changes may be implemented as the year progresses. As always, we are paying close attention to the ever-changing tax environment to discover tax planning opportunities that may put more cash in your pocket. In the meantime, here are some ideas to evaluate this fall.

Individual Income Tax Opportunities

Below are some strategies which may lower your individual income tax bill and help with cash flow for 2020.

  • Retirement Plans. If you are affected by COVID-19 and find yourself in need of additional cash flow, the CARES Act contains several taxpayer-friendly provisions for retirement plan distributions up to $100,000 taken prior to the end of 2020.

If you have funds in a traditional IRA and have been considering converting the account to a Roth IRA, 2020 might be a great year to execute that plan. Current tax rates are relatively low. Given the current economic situation and the possibility of leadership changes following the November elections, it is unlikely tax rates will decrease anytime soon. It is also possible that your income from other sources is down, driving you into a lower tax bracket. Since the CARES Act suspended Required Minimum Distributions (RMDs) for 2020, if you already budgeted to pay tax on your RMD, rolling that distribution to a Roth IRA could be a perfect move. No RMD for 2020 also means that 100% of the distribution can be classified as a rollover.

No one likes to see the value of their retirement account plummet like many of us saw earlier this year, but perhaps there is a silver lining to that decrease in your traditional IRA’s value. The depressed value in your IRA means a rollover distribution in a market downturn will contain more assets. Once in the Roth IRA, the recovery of value and ultimate withdrawal will be tax free.

  • Consider Adjusting Your Tax Withholding or Estimated Payments. If you owed taxes for 2019, you may want to revise your Form W-4. To help you do this, consider using the IRS’s “Tax Withholding Estimator,” available at If you make estimated tax payments throughout the year (for example, you are self-employed), we can take a closer look at your tax situation for 2020 to make sure you are not underpaying or overpaying. Also, if your 2019 return applied an overpayment to 2020, but you would now prefer a refund, you may have until 10/15/2020 to file a superseded return and request a refund.
  • Amended Returns.Ordinarily, an amended tax return is only filed when an error or omission is discovered after a return has been filed. With the current COVID-19 situation, any opportunity to put a little money back in your pocket is worth pursuing. All three of the major tax laws passed within the last six months contain retroactive provisions that could make amending your 2018 and/or your 2019 return (if already filed) worth the cost.


You may want to consider amending your tax returns if your child had unearned income in 2018, if you had debt forgiven on your principal residence that was included in income in 2018, or paid Mortgage Insurance Premiums (PMI) in 2018 that wasn’t deducted. Other CARES Act changes that may make an amended return appealing relate to the allowance of net operating losses (NOLs), accelerated depreciation on some business assets, or other business provisions.

  • Check Your Deduction Strategy.It is best to itemize your deductions if you have significant personal expenses. However, don’t rule out the standard deduction. For 2020, joint filers can enjoy a standard deduction of $28,400. The standard deduction for heads of household is $18,650, and single taxpayers (including married taxpayers filing separately) can claim a standard deduction of $12,400. If you are able to itemize, please note that the Tax Cuts and Jobs Act (TCJA) (a major tax reform bill passed in December 2017) suspended or limited many of the itemized deductions. However, we have some planning techniques that may help.

Tax Planning – Gift and Estate Tax Considerations

The Tax Cuts and Jobs Act increased the amount that a person may transfer via gift, or after passing, to $10 million per person, indexed for inflation ($11,580,000 in 2020). Gifts and transfers in excess of this amount are subject to transfer taxes at 40 percent. While this increased provision is currently slated to sunset in 2025, there is some concern that a change in the political climate could accelerate a change in this treatment.

If there is a change in administrations, and a cooperative Congress, both the gift and estate tax exemption and the top tax rate could change. This may mean that wealthy taxpayers will want to accelerate gifting plans or even make taxable gifts now. If you have not evaluated your estate plan recently, due to the risk of these potential upcoming changes, now might be a good opportunity to have this discussion with your attorney and tax advisor.

Please Contact Us

As we said at the beginning, this letter is to get you thinking about tax planning moves for the remainder of the year. Even though the IRS continues to publish guidance on COVID-19-related developments, there are things you can do now to improve your tax situation. Please don’t hesitate to contact us if you want more details or would like to schedule a tax planning session.

Best Regards,

Palius, O’Kelley & Janzen CPAs, Inc.


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