Wondering when you can file taxes in 2020? Or perhaps trying to find the minimum income to file taxes in 2020? It’s definitely time to sort out tax preparation. A few hours spent on your taxes now can save your time and money in April.
The Internal Revenue Service has reported more than 57 million Americans prepared and efiled their federal tax returns themselves as of October 2019. This is a full 90 percent of Americans. There were big changes in 2019 that affected many taxpayers, but the changes coming in tax season 2020 are less dramatic. There are no sweeping 2020 tax changes, but there are still updates and changes to consider.
Below is a helpful guide with useful information about available software programs, online tax preparation services, changes in tax laws, and a useful tax preparation checklist.
- Tax Preparation in 2020
- Personal Finance Software
- Online Tax Preparation Software
- Changes in Tax Laws in 2020
Tax Preparation in 2020
The filing deadline for your 2019 tax return (Form 1040) is April 15, 2020. The final extended deadline to file individual tax returns for 2019 is October 15, 2020. 2020 tax return dates for businesses are as follows:
- Original tax deadline for partnerships (Form 1065) and S Corporations (Form 1120S): March 16, 2020.
- Original tax deadline for C Corporations (Form 1120): April 15,
- Original tax deadline for exempt organizations (Form 990): May 15,
- Extension tax deadline for partnerships and S Corporations (Form 7004): September 15, 2020.
- Extension tax deadline for C Corporations (Form 7004): October 15, 2020.
- Extension tax deadline for exempt organizations (Form 8868): August 17, 2020
The abovementioned tax forms are available here.
Tax season can be stressful. So, you should plan ahead to get ready. Here are the basic steps of the tax preparation process:
1. Gathering tax documents
The forms to complete can be mailed out. They can be also available electronically from the end of January. Many online tax preparation services have forms available near the start of January as well.
2. Estimation and paying tax owed
Look through your tax forms from the previous year to check whether it is likely that you owe any tax. If you fail to pay tax you owe, you risk interest and penalties. April 16th is the date when penalties start accruing. The IRS will charge interest on late or unpaid taxes, regardless of cause.
The tax return dates in 2020 are the same regardless of whether you owe taxes or if the IRS owes you a tax refund. But there is greater urgency if you owe the government tax funds. The government will not charge fees is you fail to claim what they owe you. They will certainly charge penalties and interest if you fail to send what you owe them. A 2020 tax refund estimator can help determine if you are likely to owe money so you can plan accordingly.
3. IRA (individual retirement account) contributions information
Form 5498: IRA Contributions Information reports your IRA contributions to The Internal Revenue Service (IRS). Contribution limits are $5,500 or $6,500 if you are age 50 or older, for both traditional and Roth IRAs (a type of IRA that lets an investor save up to a certain amount of after-tax dollars each year. The earnings in the account grow tax-free, and distributions taken after age 59½ (if the account has been open at least 5 years) are exempt from taxes.
You will get a tax break for contributing to certain types of IRAs, and you can make contributions to your IRA after the end of the calendar year. For example, you can contribute to your IRA in March of 2020 and apply the tax savings on your 2019 tax form. You can make IRA contributions online with companies like Fidelity. Visit the website at https://fidelity.com/. Fidelity offers the following financial products:
- You can sell a Fidelity mutual fund in a mutual fund account and use the cash amount to contribute to a mutual fund IRA and buy a mutual fund.
- You can sell a Fidelity mutual fund in a mutual fund account and contribute the cash amount to a brokerage IRA.
- You can use cash from a brokerage account to contribute to a mutual fund IRA and buy a Fidelity mutual fund.
- You can contribute cash from a brokerage account to a brokerage IRA.
4. Filing for an extension
If there is a situation when you may miss a deadline for filing taxes or make mistakes because you're in a rush, you should request the extension. In order to get a 6-month extension, there are different forms:
- Partnerships, S Corporations, and C Corporations use Form 7004.
- Individuals use Form 4868.
- Nonprofit and charity organizations use Form 8868 to request a 3-month extension.
5. Be prepared to document major life changes to avoid an overpayment
Taxes are not static. Changes in your family or income situation impact your tax situation. When filing taxes, you should be prepared to document and provide information about the following:
- Changes to your marital status.
- Having a baby, or claiming dependents - reduces your tax rates, gives access to the Child Tax Credit, tax benefits like credits for education to the Earned Income Tax Credit.
- Educational expenses - The American Opportunity Credit and the Lifetime Learning Credit can help offset $2,000 or more of your qualifying educational expenses. If you're paying off a student loan, you can deduct up to $2,500 of your interest on your taxes. The cost to obtain certain professional certifications or designations can also be written off on your taxes.
- Retirement contributions and distributions.
- Inheritance is tax-free.
- Starting or finishing (an expat assignment). Expats receive an automatic 2-month extension.
Tax preparation is a real challenge for most people who are not sure if they should seek for professional assistance or do it themselves. Sometimes, it is better and easier to consult with a tax professional to learn what are state taxes and to pay your tax liability on time. There is a strong demand on tax preparation services because of the task complexity and importance. Looking for a reliable tax preparer you had better read reviews and users’ feedback not to get ripped off. There are many tax preparation companies on the market so that you may easily come across non-professionals like the following Pissed Consumer user who shared the
If your tax preparer acted improperly, you can report a complaint using the following methods:
- First, know that how you report misconduct depends on how the IRS has notified you of a concern. You might be notified by mail or a notice through your software. In some cases, you may discover the problem and notify the IRS of mistakes yourself.
- If you received a notice or a letter from the IRS, complete Tax Return Preparer Fraud or Misconduct Affidavit Form 14157-A and Complaint: Tax Return Preparer Form 14157. Mail the IRS with all supporting documentation and a copy of the notice or letter to the address contained in that notice or letter.
- If you did not receive a notice or a letter from the IRS, complete Tax Return Preparer Fraud or Misconduct Affidavit Form 14157-A and Complaint: Tax Return Preparer Form 14157. Mail them with all supporting documentation to the address where you would normally mail your Form 1040.
- If you suspect your identity was stolen, use Form 14039.
- If you want to report alleged tax law violations by an individual, a business, or both, use Form 3949-A. Submit to the address on the Form 3949-A.
While filing tax returns and gathering the necessary documentation, you should also consider the following:
- Are you using the itemized deduction or a standard deduction? Itemized deductions are claimed on Schedule A of Form 1040, which must be attached to your annual tax return. It is usually claimed in case of state and local taxes, gifts to charity, home loan interest, tax preparation fees, medical and dental expenses. A standard deduction is a fixed dollar amount, based on your filing status and age, that the IRS lets you take off (deduct) from your taxable income. Remember that the standard deduction was raised substantially in 2018 and that new amount still applies for 2019 taxes prepared in 2020.
- Business expenses. You can claim certain items as business expenses during the year and justify them to the IRS.
- Donations and dues may be considered and claimed as a tax deduction. Add receipts to your documentation and provide with the information on how much you have donated.
- Finance documents. Bank e-statements, credit card e-statements, retirement account information put in a tax folder. You will need information and data to support your numbers used for your taxes.
Personal Finance Software
Tax forms can quickly become complicated if you are working on your own to file. The IRS does provide free tax preparation forms if you opt to work directly through the government forms, but many individuals and families opt for help when filing taxes. If you aren’t planning to obtain paper copies of the forms directly from the IRS to work through yourself, you have plenty of options to simplify tax time and maximize your refund (or minimize your payment.)
- You can work with a certified accountant to file. This is a good option if you have a complicated situation involved multiple investments, overseas accounts or business taxes. Accountants can have substantial tax preparation fees,
- You can tax advantage of free tax preparation software and services offered by various organizations in your area. These are often sponsored by groups like AARP or local churches.
- You can use discount tax preparation services through dedicated companies like HR Block or Liberty Tax in the storefront or other locations.
- You can use online tax preparation software to file taxes yourself with the online preparation service’s guidance. Many individuals find these online services to be efficient and low-priced or even free based on income.
Working with an Account
If you have a complicated financial situation or you are concerned about the possibility of tax scams, an accountant can provide the most one-on-one instruction of the various options. Working with an accountant allows you to ask questions, to address complex issues and to protect information from potential data thieves or an online tax refund scam. Granted, humans make mistakes, so it is possible to wind up caught in a tax refund scam if your account is less than trustworthy, so be sure to do your research.
Organizations and Free Tax Preparation
If you have an organization that offers free tax preparation services, this option may offer an excellent balance of personalized tax advice and preparation and minimal or no cost.
If a well-trained tax preparer offers free tax preparation, do your research to be sure you are not walking into tax return scams with a phony. A recognized program with a solid reputation can save you quite a bit of money and offer protection from online tax scams as well.
Discount Tax Preparation Companies
Tax preparation companies spring up virtually overnight at tax time. There are booths set up in big box stores and storefront locations open and are available for walk-in services.
For those who wonder how much will I get back in taxes in 2020, the discount tax preparation companies will provide an answer quickly and might provide a prepaid debit card with an advance on your tax return as well at the time of filing.
While there are big-name organizations that set up services every year accompanied by plenty of HR Block reviews or Jackson Hewitt reviews for quality control, other preparers seem to materialize overnight. These companies might look legitimate, but might also be a front for a tax refund scam. Working with a reputable company might help you avoid tax scams in 2020, you might still wind up frustrated as this customer did with Liberty Tax.
In his Liberty Tax review #1787323 one angry customer realized that he had been charged $556 for the employee to complete a short form. He also explained, “...My form had so many mistakes that were just sloppy unporfesstional errors like name and address. My claim had a fake account and routing number...”
Complaints of this kind are not limited to one company, however. In his HR Block review #1778085, a reviewer named Ian experienced similar frustration with H&R Block.
He explained, “...They charged me 359USD do do some really easy taxes then gave me a pre paid emerald card which was eventually not approved. So utilizing their service not only didn't help me get out of a bad situation. It also cost me an extra 359 Dollars that I cant afford....”
Online Tax Preparation Software
Such software is aimed at simplifying tax operations. It allows people to file tax returns for themselves. The most commonly used are Quicken and TurboTax. They are mostly free (or a fee of $40 on TurboTax) and comprehensive. Some tax return software companies including TurboTax also provide users with the assistance of a real tax preparer. You can either type in your question or schedule an appointment with an expert.
However, you can also come across some problems. In the following tax service review, a person complained about the quality of Turbotax in review #1231854:
“Looked at my Turbotax return, clicked "How did you calculate this number?" It says: The annual total of advance premium tax credit amount is calculated by first rounding each of the Column C values in Part III of your 1095-A to the nearest dollar and then adding them all together. THEY ROUNDED! The form doesn't say to Round! It says, enter the numbers from Columns A, B and C!!! So I have to refile my 8962 and move to the back of the line to wait for my refund.”
The customer came across the system that worked badly. He needed help from the customer's service which didn't help, just mailed.
While you should always understand how tax preparation software works, using software on your own rather than relying on others can simplify your taxes and ensure you get your refund as one H&R Block reviewer discovered. In his HR review, the customer explained that there was a problem with his refund, but he had trouble getting an appointment with the company to get help sorting it out.
In HR review (#1622381 ) he states he “...was told that I had to make an appointment and that nothing was available for days and I might need to pay for it. How is it possible that I signed for and paid roughly $800 for my tax returns to be filed and upon realizing that there is some issue received the absolute WORST service ever. Additionally, I was told that paying customers had appointments ahead of me...”
Ultimately, this reviewer “...contacted my lawyer as I'm sure they deadline has past for 2016 so my refund of over 5k is lost...” Had he used online software himself, he could have verified his return and addressed concerns without any need for an appointment.
To avoid issues like these with online tax preparation software, you should always:
- Read tax service reviews about software on a website like www.pissedconsumer.com.
- Try out a demo version and read properly all the details about the product.
- Consider using the IRS Free File to prepare and file your federal income tax return for those who qualify or the IRS Free Fillable Forms for all taxpayers. These free tax preparation online resources are affordable and secure.
- Consider using the IRS Volunteer Income Tax Assistance and the Tax Counseling for Elderly programs which are developed to provide free tax help and e-file for taxpayers who qualify.
Changes in Tax Laws in 2020
This is the second year when the Tax Cuts and Jobs Act will affect taxpayers’ returns. Fortunately, most individuals and families already made adjustments to their withholding documents after filing 2018 taxes in preparation for 2019 if the impact was substantial for their family.
The tax changes from the 2018 tax year made in 2019 are still in effect as you prepare to file taxes in 2020. These changes are:
- Forms 1040A and 1040EZ are no longer available. Individuals will file Form 1040 for tax year 2018.
- Form 1065-B cannot be filed for tax years beginning after 2017.
- For 2018 most tax rates have been reduced. They are 10%, 12%, 22%, 24%, 32%, 35%, and 37%. In addition, the new tax rates applicable for the child’s unearned income of more than $2,550 are 24%, 35%, and 37%.
- The Tax Cuts and Jobs Act nearly doubled tax reductions. Starting in 2018, single filers and married couples filing separately are entitled to a standard deduction of $12,000 (up from $6,350 in 2017). For heads of household, the standard deduction this year is $18,000 (up from $9,350 in 2017). For a married couple filing jointly it is $24,000 (up from $12,700 in 2017).
- The Tax Reform also made changes to itemized deductions: for 2018 you can deduct the part of your medical and dental expenses that is higher than 7,5% of your adjusted gross income. Your total deduction for state and local income, sales and property taxes is limited to $10,000 ($5,000 for a married couple filing separately). Limit on overall itemized deductions is suspended.
- Deduction for personal exemptions is suspended.
- For 2018, the child tax credit is increased to $2,000 per qualifying child. The additional child tax credit up to $1,400 can be refundable. The income threshold at which a child tax credit begins to phase out is increased to $200,000 (and $400,000 for a married couple filing jointly). Your child must have a Social Security Number issued by the Social Security Administration before your tax return deadline date (including extensions) to be claimed as a qualifying child for the Child Tax Credit or Additional Child Tax Credit.
- A new credit of up to $500 is available this year for all of your qualifying dependents other than children. Children without a valid SSN may qualify for the Credit for Other Dependents.
- The alternative minimum tax exemption amount is increased to $70,300 ($109,400 for a married couple filing jointly or qualifying widow(er), $54,700 for a married couple filing separately). The income level at which the alternative minimum tax exemption begins to phase out is 500,000 (and $1,000,000 for a married couple filing jointly) this year.
2020 brings a handful of changes to accompany the sweeping changes made in 2019. These changes include the following.
- The standard deduction increased slightly in 2020. The standard deduction for individuals jumped from $12,200 to $12,400. It raised from $24,400 to $24,800 for married couples.
- Congress revived some recently expired tax breaks that may be gone again by 2021. Among these, victims of natural disasters like hurricanes may use employer credits and waivers for early withdrawals from their retirement savings.
- Canceled mortgage debt used to buy a principal residence is not considered taxable income, unlike other canceled debt.
- Mortgage insurance premiums are eligible for deductions.
- College tuition can be deducted up to $2,000 or $4,000 for some families in the 2019 tax year.
- One big change that creates issues over the next ten years affects individual retirement accounts or IRAs. If you inherit an IRA, it will need to be drained in 10 years, which will create a bump in income, which creates a bump in tax payments as well.
- Individuals with an IRA used to be banned for contributing to the IRA after age 70 ½. Starting in 2020, you can continue contributing to your IRA, which is a positive change for those still working during traditional retirement years.
- If you have medical expenses greater than 7.5% of your adjusted gross income, you can deduct those expenses. The previous threshold was 10%.
Tax season does not sneak up every year. It is always the same months every year which makes planning imperative to maximize your refund and avoid winding up needing a 2020 tax resolution with the IRS. As you prepare to file your taxes this season, be mindful of quality preparation and potential IRS tax scams.
If you do run into trouble with a tax preparation company or suspect you might have been taken in by a tax scam phone call or filing, you can report the instance using financial complaints through this site.
Tax scams in 2020 can show up in many ways. Some IRS tax scams involve stealing identities and filing taxes before the real individual can. To avoid these scams, simply file as soon as possible to prevent anyone from filing ahead of you. You must also be mindful of a tax scam phone call.
Popular IRS tax scams involve calling individuals and pretending to be an IRS agent. In a tax scam by phone, the phony agent asks about your tax return to gain critical information or even divert and steal your refund. Be aware that the IRS will only communicate through mail – never by direct phone call.
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