Tax Season 2020: Tips to Consider Before April 15th Deadline
That magical time of year is here again. That’s right – it’s tax season 2020. This quick and easy guide will help you avoid common tax mistakes and omissions that can cost you. It’ll also update you on important 2020 tax law changes you need to know about.
Avoid Common Mistakes
Sometimes simple errors can cause big problems. Always verify that you’ve provided the correct routing and bank account numbers on your tax forms. Direct deposit is the fastest way to get your refund, but mistakes in your bank information can cause a major IRS tax refund delay.
Correct Name, Address, and Filing Status
Always confirm that you have provided the correct name and address on your tax forms as well. Typos here are common and easy to overlook. A mistyped address can delay your tax refund and result in missed correspondence from the IRS. Get married or divorced? Remember to file accordingly if you’ve changed your name in the last year and verify that you’ve chosen the correct filing status.
Double Check Your Math and Forms even If e-Filing
Filing electronically makes it easier to avoid math mistakes, but it’s still a good idea to check your arithmetic before submitting your taxes. E-filing also makes signing easier, but always make sure you’ve signed every form you need to.
Filing On Time!
Another common but easily avoidable mistake? Failing to file on time. Mark April 15 on your calendar and make sure you hit the mark to avoid fees and penalties.
These mistakes are small but they can cause big problems. The IRS often contacts taxpayers about mistakes such as these via snail mail, which means resolving even a simple issue can take 4 to 8 weeks. A simple double-check of your return before you file can help you avoid these issues and allow you to fix them before they become problems. Sidestepping other common mistakes, however, takes a bit more work.
Missing Tax Breaks
Taxpayers often miss tax breaks, for example. Using e-filing software helps with this, but make sure you contact us for help if you think you might be missing money-saving tax breaks. It’s also important to make sure you’ve reported all of your income. The IRS will give you a chance to fix an honest oversight, of course, but the process takes time and will delay the processing of your tax return and subsequent refund.
The final mistake to avoid? Don’t fall prey to scammers. Some people claim they want to help you with your taxes when what they really want is access to your personal information. Always make sure you know who you’re talking to and never divulge personal information via email.
Remember the New Tax Laws for 2020
A new year brings new tax law changes that you need to know about. One of the most important is the annual change to the standard deduction. The standard deduction for 2020 is $12,400 for single people and $24,800 for married couples filing jointly. The deduction for the head of household filing status has been raised to $18,650.
The IRS has also adjusted tax brackets by a few hundred dollars for inflation. The new tax brackets are as follows:
- 12% for incomes over $9,875 ($19,750 for married couples filing jointly)
- 22% for incomes over $40,125 ($80,250 for married couples filing jointly)
- 24% for incomes over $85,525 ($171,050 for married couples filing jointly)
- 32% for incomes over $163,300 ($326,600 for married couples filing jointly)
- 35% for incomes over $207,350 ($414,700 for married couples filing jointly)
- 37% for incomes over $518,400 ($622,050 for married couples filing jointly)
Note too that the IRS has extended the filing deadline to June 15, 2021 for Texans impacted by the state’s unprecedented winter storms. The tax due date remains April 15 elsewhere, however, despite the late start to the 2020 tax season. If you have any doubts about whether you qualify for the extension, shoot for the April 15 deadline just in case.
There are also some substantial changes to tax credits and tax deductions in 2020. You can, for example, deduct up to 100 percent of your adjusted gross income in charitable deductions. You can also claim up to $2,000 of child tax credits per qualifying child. You can read more about 2020 credits and deductions here.
2020 Taxes and the Coronavirus
Of course, no discussion of anything 2020-related is complete without a mention of the coronavirus. Unsurprisingly, the impact of COVID-19 has trickled into the tax law as well as other facets of our lives. When it comes to your taxes, however, the news is all good.
For starters, the COVID-19 stimulus payments you may have received aren’t taxable and you need not report them on your taxes. In other good news, the first $10,200 of unemployment benefits you received in 2020 due to the coronavirus are also tax-free if your household income was less than $150,000.
Coronavirus-related tax changes will also affect how money withdrawn from your retirement accounts in 2020 is treated at tax time. The same is true of money taken from 529 and Educational Savings Accounts (ESAs). These rules are a bit complicated, but we’ve explained them for you here in plain English.
There is no question that 2020 was an interesting albeit challenging year for many of us. You’ll need to deal with your 2020 taxes before you can put it completely behind you, and we’re happy to help you do just that. We want to make sure your taxes go smoothly from start to finish, whether that means providing some reminders to help you avoid common tax mistakes or talking over 2020 law changes with you to make sure you understand how they impact you.
If you find yourself questioning your taxes, give us a call to get help and advice from tax professionals you can trust.