Forthcoming tax form changes for 2020 tax filing

estate planning

It was tax season again for most of us for tax planners in usa. We are all looking for the best software to file the taxes or tax planning services in usa and keep the Sam uncle at bay. The dividend reports, W-2, 1099s, and other tax documents stuff were already hitting in the mail. The countdown has begun to 15th April 2021. There will not be any delays that were happened in the year 2020. As there are less than two months left to file your tax, the situation is a bit more confusing while approaching the date. Even if you are okay to file your taxes all by yourself, changes have complicated things a bit.

What’s new in the 2020 taxation year?

The IRS tax form has released a draft of the 1040 form, The US individual Income Tax Return. There notable changes in the tax year 2020, you used to file in the year 2021.

CryptoCurrency in tax form

The top of the returns will not look much different from 2019, only the question on cryptocurrency compliance measure for the taxpayers introduced in 2019 in the checkbox. Schedule 1 to report the adjustments and income that cannot enter directly on the front page of form 1040.

Contributions to charity

For the 2020 tax year, the cash contributions up to $300 will be treated as the above-the-line deductions as reported in Schedule A. The new Line 10b is dedicated to the charitable contributions for the taxpayers who are taking this standard deduction.

CARES Act relief

The “Amount You Owe” Section in form 1040 referred to the Schedule H and SE filers, the line 37 may not refer to all the taxes you owe for 2020. The reason is under the CARES Act, the employers can defer the payments and deposits of the employer’s share in the social security tax. It would otherwise need to be between 27th March 2020 and 31st December 2020. The amount that is deferred will be reported in the payments section of 1040 form, Schedule 3, Line 12e for tax planners in usa.

For self-employed taxpayers, the 3rd page was added to the SE schedule. The deferred portion of the self-employment tax will get calculated. Schedule H was also redesigned to address the deferred portion for the social security tax deposits that are made by the tax planners in usa who have household employees.

The new refundable credit for the qualified family, sick leave enters on Schedule 2, Line 12b. The credit amount gets calculated on Form 7202, which the IRS has not released yet in the draft form.

Income Tax withholding report

Instead of a single line for the federal income tax withholding, the new tax form 1040 has three different lines on withholdings. Line 25a is for the Form W2, 25b is for the 1099 form, 25c is for other forms. The 25d is the complete tax withholdings. It helps in making the reconciliation of the withholding.

Income Tax withholding report

The individuals who aren’t qualified for the Economic impact Payments or didn’t receive the full amount may be eligible for the Recovery Rebate Credit basing on the situation in 2020 tax. In case if received the full amount, no need to include the information about either while filing the 2020 tax return. If tax planners in usa have that eligibility, you need to file a 2020 tax return. if you don’t usually file to claim the Recovery Rebate Credit.

Taxable items if you received the interest on a federal tax refund?

If tax planners in usa received the interest for the federal tax refund in the year 2020, Most of the interest payments were received from the tax refunds. The interest payments are taxable and must report on the 2020 federal income tax returns.

The stimulus checks aren’t taxable.

According to the IRS, the stimulus payments are not considered as income, now it comes under taxation. The stimulus payments are not considered as an income for determination of federal benefits and assistance programs during the eligibility check.

Unemployment checks are taxable.

The unemployment benefits are the lifeline for the people who lost their jobs in the pandemic situation. But, unfortunately, the jobless benefits are taxable now. When you signed up for the unemployment benefits, you may have the option to the tax withheld. Whether you receive a Form 1099-G, any severance pay you receive will be taxable.

Standard deductions for Senior citizens

To Itemize the deductions, you need to have more deductions compared standard deduction that everyone gets into the 2020 tax year. The standard deduction will be $12,400 for the individuals, $24,800 for the married couples filing tax jointly, which may go up from $12,200 for individuals and $24,400 for married in 2019.

The standard deduction has turned even better for the senior citizens of age above 65 years. The married taxpayers who were born before 2nd Jan 1956, whether filing joint or individual can get an extra $1,300 apiece that were added to the standard deductions. With the additional standard deduction of $1,650 for the singles and heads of the households, you are eligible for the same additional standard deduction amounts if you are bling and younger than 65 years. If you are over 65 years and blind as well, the amounts get doubled.

Medical Expense deductions

You need two things to deduct the medical expenses. First, the itemized deductions that include the medical deduction that adds up more than the standard deduction. The second one is to deduct only the medical expenses above the specified threshold to the adjusted gross income. The temporary current threshold of 7.5% was scheduled to return 10 percent in 2021 and is now been made permanent.

Summing it up

Many changes need to address before filing your tax year 2020. Though being able to file the tax form all on your professional tax assistant or tax planning services in usa can help you better walk through these complex changes in forms, eligibilities, rules, and stuff. Get ready for the tax filing and get the most out of it for your benefit.