Page 18 - Supplement to Income Tax TY2021

Updates, Additions, and Corrections to the Text of Your Income Tax 2021

Updates, Additions, and Corrections to the Text of

Your Income Tax 2021

Note to our readers: If you have the Professional Edition of J.K. payment in cryptocurrency) in 2020; a transaction
Lasser’s Your Income Tax 2021, some of the corrections to the text does not include holding it in a wallet or account or
and the updates provided in the following pages may already be
included in your edition. We regret any errors. transferring it from one wallet or account to another.
Health and dependent care flexible spending
The page references in the boldface headings below arrangements (pages 78–80). The Taxpayer Certainty
are to the text of J.K. Lasser’s Your Income Tax 2021. and Disaster Tax Relief Act of 2020 gives employers
Page references within the items themselves (after the the option of easing several FSA provisions; see page 4
headings) are also to the text of Your Income Tax 2021 of this Supplement.
unless reference is made to this Supplement .
As explained at the beginning of this Supplement, Gain on empowerment zone property (page 119). The
the massive government funding legislation that Taxpayer Certainty and Disaster Tax Relief Act of 2020
was signed into law on December 27, 2020 (the (see page 3 above) extends, for five years, through 2025,
Consolidated Appropriations Act, 2021), contains key the 60% exclusion for gain on the sale of qualified
small business stock (QSB) from an empowerment
tax changes covering several years. See pages 3–5 of zone business if the stock was acquired before February
this Supplement for the tax law changes. 18, 2009. Note that only gain attributable to periods
For future updates, visit jklasser.com.
before 2019 is eligible for the 60% exclusion.
Filing forms when a return is not required (page However, the new law terminates the election to
2–4). Individuals with gross income below the filing defer gain from the sale of empowerment zone assets
threshold may still need to submit forms or schedules after 2020. For sales in 2020, rollover is allowed if the
by the due date of the income tax return. asset was held over one year and the sales proceeds
• Reporting a coronavirus-related distribution were reinvested in replacement property within 60
(Form 8915-E). days of the sale; see the 2020 Schedule D instructions.
• Reporting a qualified disaster distribution (Form
8915-C for a distribution in 2018 or Form Gain on Qualified Opportunity Fund (QOF) assets (page
8915-D for a distribution in 2019) where the 120). The IRS has issued final regulations on when
income is being spread over three years (one third the gain deferral period ends; see the discussion on
in 2020) or where repayment has been made. pages 5–6 of this Supplement.
Use Form 8915-E to report a qualified 2020
disaster distribution. Qualified Dividends and Capital Gain Tax Worksheet
(pages 123, 128). The Worksheet in the 2020 IRS
Where to mail your 2020 return (page 5). The IRS
mailing address has changed for residents of numerous instructions is 25 lines, rather than the 27-line
States. See page 21 of this Supplement for the IRS worksheet shown on page 128. The computation
of tax liability is not affected. Two lines that were
addresses for 2020 returns.
used by taxpayers who file Form 4952 to claim the
Reporting cryptocurrency (page 8). If you bought, investment interest deduction have been removed
sold, or engaged in any other cryptocurrency (e.g., from the worksheet. Taxpayers who file Form 4952
Bitcoin) transaction in 2020, you must answer “yes” to claim the investment interest deduction and have
to the question found on page 1 of Form 1040 or net capital gain or qualified dividends for 2020
1040-SR. The IRS updated instructions to the return, may not use the Qualified Dividends and Capital
clarifying that reporting is required only if you engaged Gain Tax Worksheet; they must use the Schedule
in any cryptocurrency transaction (e.g., receiving D Tax Worksheet in the Schedule D instructions.

16 | Supplement to J.K. Lasser’s Your Income Tax 2021