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Tax items for tax year 2020 of greatest interest to most taxpayers



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Tax items for tax year 2020 of greatest interest to most taxpayers

Credit: TaxSpeaker.  Taxspeaker® provides education to tax, legal and financial professionals in all 50 states, as well as several foreign countries. As the only continuing education company whose manuals ever won the coveted CPA Practice Advisor Reader’s Choice Award (4 years in a row!), Taxspeaker® is known for its industry-leading manuals, expert and energetic speakers, and award-winning research and compliance checklists and guides.
To learn more, visit TaxSpeaker.com.

The tax items for the tax year 2020 of greatest interest to most taxpayers include the following dollar amounts:

  • The standard deduction for married filing jointly rises to $24,800 for the tax year 2020, up to $400 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,400 in 2020, up $200, and for heads of households, the standard deduction will be $18,650 for the tax year 2020, up $300.
  • The personal exemption for the tax year 2020 remains at 0, as it was for 2019, this elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act.
  • Marginal Rates: For tax year 2020, the top tax rate remains 37% for individual single taxpayers with incomes greater than $518,400 ($622,050 for married couples filing jointly). The other rates are:
    • 35%, for incomes over $207,350 ($414,700 for married couples filing jointly);
    • 32% for incomes over $163,300 ($326,600 for married couples filing jointly);
    • 24% for incomes over $85,525 ($171,050 for married couples filing jointly);
    • 22% for incomes over $40,125 ($80,250 for married couples filing jointly);
    • 12% for incomes over $9,875 ($19,750 for married couples filing jointly).
    • Remember the 20% capital gains rate applies to individuals in the marginal 37% bracket.
    • Individuals in the 10% and 12% bracket have a 0% capital gains rate.
    •  The lowest rate is 10% for incomes of single individuals with incomes of $9,875 or less ($19,750 for married couples filing jointly).
  • For 2020, as in 2019 and 2018, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act.
  • The Alternative Minimum Tax exemption amount for the tax year 2020 is $72,900 and begins to phase out at $518,400 ($113,400 for married couples filing jointly for whom the exemption begins to phase out at $1,036,800). The 2019 exemption amount was $71,700 and began to phase out at $510,300 ($111,700, for married couples filing jointly for whom the exemption began to phase out at $1,020,600).
  • The tax year 2020 maximum Earned Income Credit amount is $6,660 for qualifying taxpayers who have three or more qualifying children, up from a total of $6,557 for the tax year 2019. The revenue procedure contains a table providing maximum credit amounts for other categories, income thresholds, and phase-outs.
  • For the tax year 2020, the monthly limitation for the qualified transportation fringe benefit is $270, as is the monthly limitation for qualified parking, up from $265 for tax year 2019.
  • For the taxable years beginning in 2020, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements is $2,750, up $50 from the limit for 2019.
  • For the tax year 2020, participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,350, the same as for the tax year 2019; but not more than $3,550, an increase of $50 from the tax year 2019. For self-only coverage, the maximum out-of-pocket expense amount is $4,750, up $100 from 2019. For the tax year 2020, participants with family coverage, the floor for the annual deductible is $4,750, up from $4,650 in 2019; however, the deductible cannot be more than $7,100, up $100 from the limit for the tax year 2019. For family coverage, the out-of-pocket expense limit is $8,650 for tax year 2020, an increase of $100 from the tax year 2019.
  • For the tax year 2020, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $118,000, up from $116,000 for the tax year 2019.
  • For tax year 2020, the foreign earned income exclusion is $107,600 up from $105,900 for tax year 2019.
  • Estates of decedents who die during 2020 have a basic exclusion amount of $11,580,000, up from a total of $11,400,000 for estates of decedents who died in 2019.
  • The annual exclusion for gifts is $15,000 for calendar year 2020, as it was for calendar year 2019. The maximum credit allowed for adoptions for tax year 2020 is the amount of qualified adoption expenses up to $14,300, up from $14,080 for 2019.
  • The 3.8% Net Investment Income surtax implemented by President Obama in 2010 for incomes above $200,000 single and $250,000 joint still utilizes the same non-inflation-adjusted thresholds.
  • The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $19,000 to $19,500.
  • The catch-up contribution limit for employees aged 50 and over who participate in these plans is increased from $6,000 to $6,500.
  • The limitation regarding SIMPLE retirement accounts for 2020 is increased to $13,500, up from $13,000 for 2019.
  • The limit on annual contributions to an IRA remains unchanged at $6,000. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
  • In 2020, the QBI threshold will increase to $326,600 for married couples filing joint returns and to $163,300 for married individuals filing separate returns, single taxpayers and heads of households who operate pass-through businesses.

 
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of Manning & Associates and / or MANNINGTAX.COM.  This information is published for informational purposes only.

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IRS Press

IRS dispels five myths about tax refunds



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IRS dispels five myths about tax refunds

Source Credit: Internal Revenue Service, IRS Newswire, an IRS e-mail service.
Issue Number: IR-2019-64

Excerpts sourced for reference and educational purposes only.


Every year thousands of individuals anxiously await their final numbers and ultimately the status of their refund when it comes to tax time. There are common myths about refunds that often circulated on social media.


The most asked questions most taxpayers are concerned with is finding out when a refund will be issued if any.  The IRS processes 9 out of 10 tax refunds in 21 days.  The easiest way to check on a refund is “Where’s My Refund?“, an online tool available on the IRS.gov website and through the IRS2Go App.

Using this service, people can check on the status of their tax return 24 hours after the IRS receives an e-filed return or four weeks after a mailed paper return.

Taxpayers should only call the IRS tax help hotline to talk to a representative when it has been:

  • 21 days or more since their tax return was e-filed.

  • Six weeks or more since their return was mailed, or when

  • “Where’s My Refund?” tells the taxpayer to contact the IRS.


This brings us to the five common myths about tax refunds:

Myth 1: Calling the IRS or a tax professional will provide a better refund date
FALSE, using “Where’s My Refund?” is your best resource

Myth 2: Ordering a tax transcript is a ‘secret way’ to get a refund date
FALSE, using “Where’s My Refund?” is your best resource

Myth 3: ‘Where’s My Refund?’ must be wrong because there’s no deposit date yet
There could be other factors: it’s possible a refund may take longer for a variety of reasons including when a return is incomplete or needs further review.

Myth 4: ‘Where’s My Refund?’ must be wrong because a refund amount Is less than expected
There might be several factors that could cause a tax refund to be larger or smaller than expected. The IRS will mail the taxpayer a letter of explanation if these adjustments are made. Some taxpayers may also receive a letter from the Department of Treasury’s Bureau of the Fiscal Service if all or part of their refund was reduced and offset to pay certain financial obligations.

Myth 5: Getting a refund this year means there’s no need to adjust withholding for 2019
FALSE – Annual tax planning is important. Checking withholding is important every year, and the IRS encourages people to do a Paycheck Checkup. This is especially important for anyone who got an unexpected result from filing their tax return this year because they had too much or too little withheld from their paycheck in 2018. IRS Withholding Calculator is a great tool to determine whether the right amount is being withheld.

To read more details, please follow this link for more information: https://content.govdelivery.com/accounts/USIRS/bulletins/23c2df2


The take away…

From Internal Revenue Service, IRS Newswire

Annual tax planning is for everyone. To help avoid an unexpected tax outcome next year, taxpayers should make changes now to prepare for when they file 2019 tax returns next year. This can mean adjusting tax withholding with their employer or increasing estimated or additional tax payments.

Checking withholding is important every year, and the IRS encourages people to do a Paycheck Checkup. This is especially important for anyone who got an unexpected result from filing their tax return this year because they had too much or too little withheld from their paycheck in 2018.

Use the IRS Withholding Calculator to determine whether the right amount is being withheld. If an adjustment is needed, taxpayers should submit a 2019 Form W-4, Employee’s Withholding Allowance Certificate, to their employer as soon as possible.

Sourced: https://content.govdelivery.com/accounts/USIRS/bulletins/23c2df2


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