The Internal Revenue Service has announced that the tax season will open on Monday, January 27, 2020. On this day, the IRS will begin accepting paper and electronic tax returns for 2019.
Now is the time to check your withholdings and prepare your information. Don’t miss the deadlines!
We have prepared some tips for you to consider in the coming weeks. They’ll help you avoid fines and provide you with a straightforward filing experience.
Develop the right approach to tax deductions
If you plan to itemize your deductions, you should consider that bunching them up is the best way to maximize a refund. By doing so, you’ll be able to increase the sum you deduct for the next year. Allow us to explain.
Imagine you’ll be donating money to charity at the end of 2019 – better take your $1000 and keep it before 2020 comes around! Making your first donation in January and your second one in December of 2020 will give you $2000 for an itemized deduction. This is, of course, better than a small deduction for the 2019 tax season.
Keep in mind that you have the same opportunity with health services (but only in case there is nothing medically urgent for you). Leave your dental bills for 2020 as itemized deductions. Remember that having correct timing will be advantageous for your tax return.
Get more money for education
Don’t hesitate to contribute to a 529 college saving plan in your state for a tax deduction. The deadline to qualify for the tax break is the 31st of December (there will be no opportunity after this date). Some deadlines are extended into the next year, but you’d better check just to be sure. Remember that you’re making this contribution using taxed money!
Donations benefit you
Simply make your qualified charitable distribution directly from your retirement account after finding an eligible organization. This works for older taxpayers even in cases where they prefer not to itemize their deductions. If you donate less than $100,000 per year, it is not included in taxable income. At the same time, it counts towards the required minimum distribution.
More for retirement, less for taxes
If you are 50 or older, take into account the opportunity to contribute more to an employer-sponsored retirement account for reducing your taxable income. The limit for 2019 is $25,000 (if you are younger than 50, you can also do it with a lower limit).
You can still contribute to I.R.A.s until April 15, 2020. But remember to say that your contributions are for 2019. This will allow you to meet the income limits and get your deductions without hassle.
Better to spend than lose
Ever planned on spending money on something important, only to realize that you couldn’t afford it? The time has probably come to use your savings, or else you may lose them by December 31st. You can use money that was put into a flexible spending account or your account of dependent care. Check the balances and options suggested by your provider. It’s likely that your deadline for spending F.S.A. money isn’t until March 15. However, dependent care will not provide this type of opportunity.
Some new surprises
While filling out your 1040 form in 2020, you might discover something new — it’s now required to file any profit received by a taxpayer via the sale of any cryptocurrency. This is the first time the form will contain a direct question regarding this topic. To understand if your operation with a virtual currency was a taxable event, check out this reference guide from the IRS.
Not sure about your withholdings? No time to risk or guess – simply use the IRS Tax Withholding Estimator and fill out a new W-4 form if something went wrong. Make sure that you withhold at least 90 percent of your liability to avoid paying a fine!
We cannot protect you from all possible tax season issues. At the same time, we can provide you with topical and useful tips and give you the most convenient and secure methods for filling out your tax forms! Enter here to simplify your tax season.