The 2020 tax season is still several months away, but you’ll be gathering paperwork before you know it. Plus, the details of filing 2019 tax returns are still being worked out by the IRS, and it’s never too early to be prepared in advance. To help prevent any surprises between now and then, we’re providing the best tips for the 2020 tax-filing season.
Take a Closer Look at Your Paycheck
Take a minute to double-check the withholding amount on your pay stub. If you’re not having enough tax withheld from your paycheck, you will owe money at tax time. If too much tax is being withheld, you’ll get a refund, but that also means you’ll have more money every payday. If you’re unsure of how much tax to withhold, use the IRS’ tax withholding estimator to evaluate your paycheck and adjust your withholding for 2020, if necessary.
Find a CPA Who Will Help Prepare and File Your Taxes
If you had major changes in your life in 2019, such as marriage, divorce, or starting your own business, your taxes will be more complex. As a result, you’ll need an experienced CPA firm in New York, such as AHAD&CO, to help prepare and file your taxes.
It’s important to not wait until April to make that decision because it could end up costing you. According to the National Society of Accountants, the average fee in 2018-2019 for a professional to prepare and file an itemized Form 1040 with Schedule C (for sole proprietors of a business) and a state tax return was a costly $481.
Max Out Retirement Contributions
If you’ve been on the fence about funding your employer-sponsored 401(k), 403(b) or other tax-deferred retirement account, increase your contributions. The money you put in these accounts reduces your taxable income for the year, which reduces your tax bill. It’s only taxed when it’s withdrawn.
For 2019, contribution limits are $19,000, plus $6,000 in catch-up contributions if you’re 50 or older. For 2020, limits are increased to $19,500 and $6,500 in catch-up contributions. If you have an IRA through a broker or bank, contribution limits for 2019 and 2020 are $6,000 plus $1,000 in catch-up contributions.
For those who can’t afford to make the maximum contributions, try to contribute the amount that will be matched by employer contributions. Those funds are also tax-deferred and grow tax-free.
If You’re Itemizing, Consider the Bunching Method
The standard deductions are double what they used to be, making it hard to itemize. The 2019 deductions are:
Taxpayers who don’t have enough deductions to surpass those thresholds take their standard deduction. The bunching method is when you time expenses by pushing deductible expenses into the same calendar year. For example, doubling charitable contributions, or accelerating tax deductions such as property taxes, or medical bills.
As an individual, just calculating how much in taxes you owe is not enough. As a business, a pivotal part of success is having an expert accounting team to handle all your business tax matters. Whether you’re an individual with unique needs or a business, we have all the resources to help you navigate the IRS tax code with ease, along with a host of other tax services. Contact us today for a free consultation and see how we can work together.