Top 20 Tax Tips for 2020
Tax Day 2020 is Wednesday, April 15. Less than two months away!
According to the IRS, “a contribution is an amount an employer and employees (including all self-employed individuals) pay into a retirement plan.”
1. Contribute to Retirement Accounts
If you didn’t fund your IRA account for 2019, take action before April 15, 2020. That’s the deadline for contributions to a traditional IRA deductible or not, and to a Roth IRA.
2. Charitable Donations:
- Itemize all items
- Tax deductible donations must meet certain guidelines
- For more information, see Pub. 526.
3. Make an Estimated Tax Payment
Make an estimated tax payment if you have a:
- business income from self-employment
- a partnership
If you expect to owe tax of $1,000 or more when you file your return:
You may need to pay estimated taxes if you have income from investments, rentals, retirement plans, or any other type of taxable income not adequately covered by wage or voluntary withholding. For more information, see IRS Tax Payments Estimates.
4. Track Estimated Tax Payment Schedule
If you meet the estimated tax payment requirement, please note the following dates, as payments for tax year 2020 are due every quarter on these dates:
January 1, 2020, to March 31, 2020
April 15, 2020
April 1, 2020, to May 31, 2020
June 15, 2020
June 1, 2020, to August 31, 2020
September 15, 2020
September 1, 2020, to December 31, 2020
January 15, 2021
5. Organize Your Records for Tax Time
Tax Records for Deduction:
- Charitable donations
- Outlays for health care
- Gambling winnings and losses
- Property tax expenditures include for your auto.
6. Track Tax-Related Information
It’s important for tracking expenses.
- Expense title
- Check numbers
- Payee names
- Dollar amounts
7. Note Deductions Through Out the Year
- Log car miles used for volunteering, work, business or medical appointments as well as parking, bus and taxi fares and tolls can help you qualify for a deduction.
- Maintain an inventory of cash receipts that document your transportation, charitable work and other tax-deductible activities.
8. Save Documents for Life Events:
- Death of a Spouse
- Deductible alimony payment records
- Adoption papers
- Child custody agreements
- Child care
9. Can’t Deduct Alimony in 2020
For divorce and separation agreements made or modified this year or thereafter, alimony payments will not be deductible, according to IRS Publication 5307. For more information, see Pub. 5307.
10. Provide Dependents Tax ID’s:
- Social Security numbers for all your dependents to claim on tax return
11. Health Spending
In 2020, the dollar limit for employee salary reductions for contributions to a health flexible spending account (FSA) is $2,750, up $50 from the limit for 2019. For more information, see Pub. 502.
12. Purchase or Sell a Home (Tax Records)
- Closing documents
- Home improvement invoices, receipts and proof of payment
- Annual mortgage statement
13. Resurrect an Amended Tax Return
Unless you didn’t file your 2018 tax return, you can file an amended return for that year to take advantage of tax breaks that were retroactively resurrected for 2018. Ask your tax adviser if it’s worth the time.
14. Retain A Tax File History
- A tax return has value after April 15th. Retain your tax return to get a mortgage, apply for student loans and to check the status of your refund on the Internal Revenue Service’s “Where’s My Refund?” web page.
15. IRS Audit
- Did you know that IRS can audit you for three years after a filing date, and in some cases even longer!
- Retain all your tax return copies and support documents for four years.
16. Find The Right Tax Forms:
- The IRS lists a catalog of Tax Forms and Publications to choose from. Please consult with your tax advisor or the IRS to select the right one.
17. File and pay on time
If you are behind filing your tax return on April 15th 2020, please file Form 4868 by April 15, 2020. Form 4868 allows a six-month extension of the filing deadline until October 15, 2020.
18. Can’t Pay Taxes?
You still need to file your tax return on time even if you can’t pay the taxes you owe on time or you will be subject to late penalties.
You have several payment options:
- Schedule an automatic payment from your bank
- Short-term payment plan for up to 120 days for automatic monthly payments till you clear your balance.
- Long-Term Installment Plan: If you need more than 120 days to pay. Best practice is to pay through direct debit (automatic monthly payments from your checking account).
19. What will happen if I don’t pay my taxes?
- If you don’t pay your taxes you will begin to incur penalties and fees beginning the day after you fail to pay.
20. Are there other penalties for not paying your taxes?
Yes, it could result in the following:
- Your salary/accounts can be seized through a tax levy.
- A federal tax lien can be filed against your property.
- You can be served a summons asking you to provide more information.
The information on this webpage is for informational purposes only and is not intended to substitute for obtaining tax, accounting or financial advice from a professional tax planner or financial planner. Please contact your tax accountant for all tax-related information.