Tax Returns 2020

As we’ve said goodbye to 2019, we also get to say hello to a plethora of new tax laws that take effect in 2020.  As we move into this new decade, take stock, and see what the new rules are and how they'll affect you.

One of the most significant changes is simplifying our filing process for seniors.  Historically our 65+ have had to use multiple different forms and timeframes when filing.  With the introduction of the new 1040-SR form, which could be a fraternal twin to the 1040A, there's no limit on income. With many lines for different types of income, deductions, and credits, most seniors should be able to use the form, simplifying preparation. Timeframes will be 1,2 or 3, while 4,5 and 6 are eliminated.  Another change involves the W-4, where the allowance section goes away.  Probably wise to do a paycheck check to ensure your allowances are up-to-date, and if you're uncertain, you can always utilize the tax withholding estimator for guidance. 

Staying in the ‘saving’ lane, another significant change comes with bigger rewards on your tax return if you save for retirement.  The IRS has raised employee contribution limits for 401k, 403b, and 457 plans to $19,500; For our 50 and older an additional $6500.00, both seeing a $500.00 increase from 2019.

We mustn’t forget about inflation, and our tax laws haven’t.  Standard deductions rise for our singles to $12,400 and for couples to $24,800.  Also, the tax brackets expanded, reflecting a 2% increase.  Lastly, exemption from alternative minimum tax saw the effects of the inflation boost.  The key take-away is to ensure you're being impacted by inflation and not just pay increasingly year after year!

A few other changes essential to note; Alimony is no longer deductible by the payer, and the recipient will not include payments in income.  For all those virtual currency enthusiasts, it will now be recognized as property for tax purposes requiring the reporting of capital gain or loss. Speaking of alternatives, the plug-in electric drive motor vehicle credit takes effect.  Considering you have to pay a premium when purchasing one of these innovative, environmentally-friendly vehicles, the investment may provide a credit up to $7500.00

For all the up-to-date tax law information, don't hesitate to contact Lewis CPA your one-stop for all things tax-related!