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Greetings! Life seems to always pick up the pace in the month of February. For us, we start thinking about all of the appetizers we plan on eating when watching the Super Bowl (we won’t tell you our pick!). It is also when we start thinking about taxes. While not the most glamorous topic we’ve spoken about, we wanted to take the opportunity to help you ease into the season by offering a few tips and tax updates you may want to consider.
Many of you are now in the process of collecting your information for tax preparation. When available, your Schwab tax documents will be on both the Schwab Alliance website and through our Client Portal—please let us know if you need any help with access—in addition to mailed copies.
As you start to schedule tax preparation appointments, please know that most 1099s should be in the mail by the end of February. However, there is still the potential for amended 1099s to be mailed in March. This is often due to the reporting of some mutual fund companies.
If a contribution was made into an IRA, SEP, Roth or Simple account in 2020 a 5498 will be mailed around the end of May 2021. The 5498 form is not required to be filed with taxes.
Here’s a few key items to remember about pandemic-related tax changes (CARES Act) and other legislative updates:
  • Required Minimum Distributions (RMDs). RMDs for the 2020 tax year were suspended. While not required, if you did take a distribution from a qualified account this will still be included in your taxable income. Remember, last year with the 2020 Retirement Savings Laws (SECURE Act) the age at which individuals must begin taking required minimum distributions (RMDs) increased from age 70 ½ to 72. This only applies to individuals who turn 70 ½ after December 31, 2019. Please also note that RMDs are back in play for this upcoming 2021 tax year.
  •  Early Distribution Penalty Waiver. Generally, withdrawing funds from your retirement plan before 59½ would trigger a 10% tax penalty. However, the CARES Act allowed participants affected by COVID-19 to take up to $100,000 from the plan penalty-free. This withdrawal is still taxable at ordinary income rates but there is an additional cushion allowing the tax payments to be spread over three years. You would also have three years to recontribute the early distribution into the account (and have it not count toward your annual contribution).
  • Unemployment Benefits are Taxable. There was a $600-per-week federal boost to state unemployment benefits, but just a reminder that unemployment benefits are subject to federal income tax, including the additional boost.
If any of these updates are specific to you, we’d encourage you to work with your tax professional to ensure you are taking advantage of any changes available for you. And if there are any questions regarding your tax documents or anything else on your mind, please don’t hesitate to contact us. We would love to hear from you. If there is anyone you know who may benefit from this feel free to forward this on or we are happy to connect with them directly.
Thank you,
Kelli & Amy

I am in the business of helping people always; whether that be in my relationships or my career. I value serving others and there is no greater joy than looking into someone’s eyes and knowing I served them well. I was drawn to this field because of my desire to come alongside people, learn about what is most important to them, and then diligently working to help those goals come into fruition.