2019 Income Tax Updates
Wow…. 2019 past by quick. It’s on pace to finish that way too.
The next few weeks are the blurriest of the year.
Before you get into coordinating Thanksgiving dishes, family arrangements, and stocking stuffing, make sure you’re ready for the new year. Now is a great time to check if your taxes are in order.
It’s Time to Review Your 2019 Taxes
You have six weeks to make adjustments to minimize your 2019 taxes. Some tax planning methods require a bit of cash on hand, so it’s best to start planning ASAP. Most deadlines to act are December 31st or April 15.th
Click here to schedule a meeting your check your 2019 taxes.
If you want to contribute to your retirement or health savings account, own a business, or lease a rental property, it is particularly important to plan. We will estimate the upper limit on how much you can put in and the tax benefit.
Part of tax planning is knowing what the upcoming changes are. More pieces of Tax Reform are coming into effect. Here is a summary of the significant changes you should know.
Key 2020 Tax Updates
IRS Withholding Estimator
One of the most shocking trends I saw last year concerned employees. In prior years, maybe you didn’t owe much. But, when you filed your 2018 taxes, you received a big refund or big bill. 😲
The reason is because of Tax Reform– especially the standard deduction and (R.I.P.) exemptions changes. Payroll companies didn’t get much information on how to update withholdings for the new laws.
To avoid a similar surprise, grab your last paycheck. The IRS created a tool to make sure you’re on track. With the Withholding Checkup on the IRS website, you enter your current year information to learn if you have underpaid or overpaid.
A caveat: it’s lengthy.
If you prefer not to DIY it, let’s set up an appointment. I’ll do the heavy lifting to help you avoid any surprises early in the new year.
Withholding Changes… Again
Your net pay may change in January. The IRS is updating the withholding tables, which will take effect on Jan 1st. You don’t have to do anything – your company’s payroll processor will. It will recalibrate your taxes withheld on each paycheck.
Next year, I recommend you do another withholding checkup, as I mentioned above.
Individual Mandate
No health insurance? No worries. The penalty for not having it is gone.
Alimony is Taxed Twice
If you get divorced after 2018, both people will pay taxes on alimony. The payer cannot deduct it. The recipient continues to pay taxes on it. The same goes for some modifications and separate maintenance agreements.
Virtual Currency Taxation
Cryptocurrencies are foreign currency, per the tax code. The IRS is upping their game. Before now, they debated how to treat virtual currencies. In 2019 they went after trading platforms, like Coinbase, to find out who owns what.
If you owned or traded Bitcoin, Etherium, Ripple, or similar, reach out. You have to comply with foreign asset rules. If the IRS got your information from a trading platform and sent you a letter, please reach out.
Underpayment Penalty Refund
Did you get a check from the IRS recently? If you were charged an underpayment penalty on your 2018 return, you might get that money back. Tax Reform made it very difficult to correctly estimate taxes. The IRS recognized this mid-tax-season and changed the rules to be more lenient.
If you filed early in the last season, paid an underpayment penalty, and meet the updated guidelines, the IRS will automatically send you the money back. It relates to estimated payment rules known as “safe harbor rules.” You can learn more about them in this post.
For the 2019 season, the usual rules apply.
Online Sales taxes
This blog is about income taxes, but it’s worth mentioning the massive changes to sales taxes. In most states that have a sales tax, online sellers and digital products and services now have to charge sales tax. You’re more likely to pay sales tax even if you don’t go to a physical store or buy a tangible item. If you’d like to know more, read this.
Business Tax Updates
There aren’t any big changes to business taxes. The amount of bonus depreciation you can take is less than last year, but we have other options.
The IRS released more guidance on how to calculate the 20% Qualified Business Income Deduction (Section 199A). It’s now possible that some real estate businesses qualify for the deduction!
KIS Tax Update
Last year I worked relentlessly to create a smooth, friendly, and efficient system to file your taxes. My goals were to keep your costs down and provide the best experience. The feedback I got was encouraging, so I’ve refined it to be even better.
Starting this tax season, I’m going 100% virtual.
If you didn’t use my online portal system last year, I ask that you give it a shot. Instead of waiting in an office for hours or taking multiple trips, you can do it all from home in your PJs and fluffy socks! My system is secure, straightforward, and quick. Especially if you’ve filed with me before.
Most clients already work with me virtually. I sincerely hope that I’ve impressed you with my work and this update won’t cause you any hiccups.
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Taxes are a fact of life, but they don’t have to trip you up. Let’s get ready for the new year by running the numbers. It’s better to learn of any surprises now when you can still make changes.
As the saying goes, hindsight is 20/20.
If you feel good about your taxes, have a fantastic holiday season! I’ll be in touch early next year.
Otherwise, you can click here to schedule a meeting. We’ll make sure you won’t have any surprises come the new year.
Did I miss something that you’re curious about? Comment or reach out. I’m here to teach you anything you want to know about accounting and taxes and to help you simplify your finances.