Every year, it’s crucial to monitor tax changes and other relevant information so you or your business can prepare accordingly. Last year was significant for tax professionals, as many of the changes from the landmark Tax Cuts and Jobs Act (TCJA) went into effect. Now, taxpayers are being forced to deal with the coronavirus pandemic.
The COVID-19 pandemic has impacted a number of areas, including federal taxes. The IRS recently pushed back its traditional April 15 deadline for filing 2019 taxes to July 15 in response to the pandemic.
The good news is that taxpayers have an additional three months to file their taxes. The bad news is that perhaps this year, more than ever, taxpayers will also be hoping for a break on their taxes and to hopefully pay back as little as possible in the event they owe money. Here’s what you need to know about tax changes for 2019 returns.
Preparing 2019 Tax Returns
If you have yet to file your taxes, you’re in luck—in March, the Internal Revenue Service pushed back the traditional April 15 deadline for filing taxes to July 15. Now that you have an additional few months to prepare, it is important to make yourself aware of recent changes.
The 2018 tax filing season was an important one, as just about every American was impacted positively or negatively by the major 2018 tax reform. The Tax Cuts and Jobs Act dramatically changed tax rates and deductions.
In 2019, you can expect more of the same with the added struggling of small businesses and individuals currently adjusting to government regulations and mandatory shutdowns.
There are a few major changes in 2020 compared to 2019 returns:
- Income tax brackets increased in 2019 to account for inflation.
- There is no longer a penalty for not having health insurance.
- The standard deduction increased to $12,200 for single filers and $24,400 for married couples filing jointly.
2020 Tax Law Changes
The year 2020 will notoriously be defined by COVID-19, which has wreaked havoc across the globe. As we mentioned, the federal government recently extended the deadline for filing a 2019 tax return to July 15, 2020. You now have until after Independence Day to stay current on tax reporting. Keep in mind, though, that the extension only covers federal taxes and not state taxes. Some states maintained a traditional April 15 deadline, while others extended their deadline to match the federal response.
It is important for the millions of Americans suffering from job loss and financial difficulties to understand that now is not the time to avoid filing taxes, even if you are concerned about how you will afford to pay back the debt. Deliberately ignoring or refusing to file taxes because you are worried about unpaid taxes or tax debt is far worse than filing on time, and then pursuing channels to resolve tax debt in a reasonable manner.
Secondly, income brackets have changed for 2019. Please reference the 2020 tax brackets section below for more information on how tax brackets were adjusted this past year for inflation.
Thirdly, the IRS introduced even higher standard deductions for taxpayers in 2019 compared to improved rates in 2018. The standard deduction is an automatic reduction of what you owe in taxes based on your filing status. The standard deduction increased to $12,200 for single filers and $24,400 for married couples filing jointly.
Finally, there is no longer a penalty for not having health insurance in 2019. It does save you close to $700 per year in tax penalties. Additionally, a higher threshold for medical expenses deduction is added for 2019 returns along with changes to the estate tax exemption.
2020 Tax Brackets
The tax brackets established for 2019 tax returns increased because of inflation. It is vital to make yourself aware of your filing status and tax bracket to determine how much you will be charged in taxes.
Here are the rates for 2019 tax returns:
2019 Tax Brackets (Due July 15, 2020)
|Tax rate||Single filers||Married filing jointly*||Married filing separately||Head of household|
|10%||$0 – $9,700||$0 – $19,400||$0 – $9,700||$0 – $13,850|
|12%||$9,701 – $39,475||$19,401 – $78,950||$9,701 – $39,475||$13,851 – $52,850|
|22%||$39,476 – $84,200||$78,951 – $168,400||$39,476 – $84,200||$52,851 – $84,200|
|24%||$84,201 – $160,725||$168,401 – $321,450||$84,201 – $160,725||$84,201 – $160,700|
|32%||$160,726 – $204,100||$321,451 – $408,200||$160,726 – $204,100||$160,701 – $204,100|
|35%||$204,101 – $510,300||$408,201 – $612,350||$204,101 – $306,750||$204,101 – $510,300|
|37%||$510,301 or more||$612,351 or more||$306,751 or more||$510,301 or more|
As you prepare to file taxes by the 2019 deadline on July 15, 2020, keep in mind your tax rate and tax bracket, and make sure you understand the implications of both. The tax rate is the percentage of your income that you pay in taxes. Meanwhile, the tax bracket is the income range you fall under.
You can determine what percentage you will be taxed based on your filing status. There are four filing statuses under federal guidelines:
- Single Taxpayer
- Married Filing Jointly
- Married Filing Separately
- Head of Household
Do you need help with your 2019 tax return? Levy & Associates is sympathetic to the current struggles individuals and small business owners are facing with taxes in light of the coronavirus pandemic. Contact us today for a confidential consultation provided to you at no cost.
During Challenging Times, Depend on Levy & Associates
The coronavirus pandemic has impacted all aspects of life, including federal and state tax collection. Thankfully, the deadline for federal taxes (and some state taxes) was recently extended by three months to a July 15, 2020 deadline.
Contact Levy & Associates for help with your 2019 taxes. We have the experience and knowledge to introduce you to the 2020 tax law changes and ensure you’re filing your taxes correctly. We will work hard to make sure you maximize deductions and avoid owing the IRS more than you deserve to pay back!