Besides resolutions the beginning of a new year brings thoughts of getting one’s taxes done. Here are a few things that taxpayers should be aware of for the 2020 filing season:
Standard vs. Itemized Deduction
Since the passage of the Tax Cuts and Jobs Act more taxpayers qualify for the standard deduction than before. For 2020 the standard deduction is $24,800 for married couples filing joint returns; $12,400 for single taxpayers and married couples filing separate returns; and $18,650 for taxpayers filing as head of household. Taxpayers can normally choose the method that benefits them most, but married couples filing separate returns must use the same method.
Normally a taxpayer must itemize deductions to get credit for their charitable contributions, but for the tax year 2020, the IRS is allowing taxpayers to deduct as much as $300 in cash contributions made — even if you use the standard deduction.
Retirement Planning
Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. During the year, if either the taxpayer or their spouse was covered by a retirement plan at work, the deduction may be reduced or phased out. If neither the taxpayer nor their spouse is covered by an employer-sponsored retirement plan, the phase-outs of the deduction do not apply.
Roth IRA contributions are not deductible, and there are income limitations on the amount you can contribute. For the tax year 2020 the income phase-out range for taxpayers making contributions to a Roth IRA is $124,000 to $139,000 for single taxpayers and a head of household and $196,000 to $206,000 for married couples filing jointly.
The 2020 contribution limit for a traditional or Roth IRA is $6,000, with an additional $1,000 allowed for those age 50 and up. Those contributions would need to be made by April 15th.
Notice for Late Filers
Those that do not normally meet the deadline should know that the fine for filing late returns is higher now than in the past. The minimum penalty for returns filed 60 or more days after the due date is now the lesser of $435, or 100% of the required tax shown on the return. A six-month extension is available for taxpayers that need more time after April 15th, but that extension is only to file a return. All taxes that are due for 2020 must be paid by April 15, 2021.
