As the 2020 filing season revs up, tax professionals should be aware — and most probably already are — that taxpayers remain confused about the new tax law.
Plenty, according to a survey of taxpayers released Thursday by TaxAudit, an audit defense service.
The poll, conducted by SurveyMonkey among 1,050 U.S. adults from Jan. 31 to Feb. 1, found that 45% of respondents still had questions about filing their taxes under the sweeping tax overhaul enacted in 2017.
The most confusing aspect of filing taxes, according to respondents, was understanding tax credits, deductions and whether or not to itemize.
Fifty-six percent were uncertain whether the tax overhaul had made it easier or harder for them to do their taxes; 23% said it had made it harder. Almost half were unsure whether the new tax law was better than the old one, while a quarter said it was better.
Some three in four taxpayers surveyed were unaware of recent bills that had been enacted since then, including the Further Consolidated Appropriations Act in 2020, the Setting Every Community Up for Retirement Enhancement (Secure) Act in 2019, the Taxpayer First Act of 2019 and the Bipartisan Budget Act of 2018.
“This survey shows how confused taxpayers still are about the newer tax laws, and it’s imperative to understand how this year’s changes could impact returns,” TaxAudit’s customer advocacy officer Dave Du Val said in a statement.
This year, there are new changes to deductions, credits and limits that taxpayers should be aware of to minimize their tax burden and avoid tax debt, according to Du Val.
“Taxpayers should work closely with their tax professional to ensure their taxes are correct,” he said. “No one should have to pay more than they have to or join the 30 million taxpayers who already owe back taxes to the IRS.”
Changes for 2020 Filings
TaxAudit listed of some of the major changes for 2019 tax returns that will be most germane to this year’s taxpayers:
Higher standard deduction: For the 2020 tax year, $12,400 for single taxpayers and married ones filing separately, $24,800 for married taxpayers and $18,650 for heads of households.
New thresholds for contributions to traditional IRA and health savings accounts: This year’s IRA base contribution is $6,000 and the “catch-up” is $1,000 for those 50 and older. HSA contribution limits have also increased for both self-only coverage and family coverage.
Higher limits for contributions to Roth IRAs. For 2019, single taxpayers with incomes below $122,000 and joint filers with incomes below $193,000 can contribute up to $6,000, or $7,000 for those over 50, directly to a Roth IRA by April 15. This income limit and deadline do not affect 401(k) Roth accounts.
Larger refundable amount for Earned Income Credit for tax years 2019 and 2020: The tax year 2019 maximum amount of credit available for lower income families who have three or more qualifying children is $6,557, rising to $6,660 for 2020.
Higher income thresholds for Child Tax Credit: The income limitation has been raised to above $200,000 for a single person and $400,000 for joint filers. The credit per child under 17 years of age is now up to $2,000, of which $1,400 is a refundable credit. Even if a child turns 17 or there are other dependents, the taxpayer can claim a $500 Other Dependent Credit.
Credits and deductions extended retroactively to 2018: New legislation signed by the president in December retroactively extended several popular tax breaks to 2018, including deductions for tuition and fees and mortgage insurance premiums.
TaxAudit said professionals will also want to explore these tax rules with clients, if applicable:
- Higher limits for qualified transportation fringe benefits
- Higher credit amount for adoptions
- High exclusion amount for U.S. taxpayers working abroad
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