You may be studying for the CPA Exam, but most likely, you are simultaneously working in the accounting profession. As tax season approaches, there is undoubtedly a buzz around your office regarding taxes. And even if you are immune to filing tax returns at your job, you cannot escape filing (or at the very least, paying someone else to file) your tax return!
The complexities of taxes seem to perpetually increase, such that few believe the federal, state, and local tax code is easy to understand. Last year alone introduced the Tax Cuts & Jobs Act (TCJA) and extensive changes for taxpayers across the board. Thankfully, we have one year of adhering to the TCJA under our belts. However, there are still several changes to be aware of - whether you are filing taxes personally or professionally.
Make sure you adhere to the tax timeline.
- Individuals can expect to begin receiving their tax documents in late January. These documents may come from employers, banks, investment companies, the Social Security Administration, etc.
- Near the end of January, the IRS allows the filing of 2019 tax returns.
- Tax Day is customarily on April 15, so mark that date on your calendar as a hard and fast deadline. That gives you just over 11 weeks from when documents start coming in until tax season ends.
- Extensions give you additional time to file, as the extended deadline is October 15. However, if you want to go on extension, you still need to file for that extension by April 15.
Changes to Standard and Itemized Deductions
- The standard deduction is similar to 2018’s, but increased slightly within each category: Single and Married Filing Separate: $12,200, Head of Household: $18,250, and Married Filing Joint: $24,400. Like last year, fewer individuals are expected to itemize due to these higher standard deduction amounts.
- For those who do continue to itemize, the threshold for itemizing medical expenses increased to over 10% of AGI, and the maximum that can be deducted for state and local taxes remains capped at $10,000.
Diving into Contribution Amounts
- HSAs: Individuals can contribute up to $3,500 for individual self-coverage and up to $7,000 for family coverage.
- IRAs: Individuals can contribute $6,000 to an IRA and up to $7,000 in “catch-up” contributions for taxpayers over age 50.
- 401(k): Individuals can contribute $19,000 to a 401(k) plan and up to $25,000 in “catch-up” contributions for taxpayers over age 50.
- Reminder: Some of these contributions may help decrease a taxpayer’s taxable income, and under some circumstances, contributions can be made past December 31, 2019, and still lower 2019 taxable income.
Tax professionals can offer individualized advice on actions you can take to minimize your tax liability.
- The seven tax brackets are 10%, 12%, 22%, 24%, 32%, 35%, and 37%
- Alimony is no longer deductible, but that only applies for alimony from divorce decrees signed after 12/31/2018
- The Qualified Business Income (QBI) Deduction is still available, but there is a simplified form this year. The QBI deduction can be quite complicated, so make sure to review the calculation and the criteria taxpayers must meet to qualify for it.
Ready to get prepared for tax season?
These reminders are certainly not a comprehensive list of everything you need to know for the tax season ahead, so pay attention to ongoing announcements from the IRS and stay up-to-date on any developments! Also, we have focused on individual tax filings here, but please don’t forget that all other filings – S-corps, C-Corps, partnerships, estates, trusts, etc. will be due in the months ahead, and each of these have their deadlines and extension deadlines. There is a lot to keep track of here, especially as you also manage your CPA Exam study time, but plan, do your research, and you’ll be prepared for a successful tax season!
Would you like more advice on this topic? Check out our podcast episode with Eva Rosenberg, “Tax Mama” or check out her website for even more recent tax law updates: https://www.spreaker.com/user/yaegercpareview/004-taxmama?utm_medium=widget&utm_source=user%3A10975187&utm_term=episode_title