McKay Tax Annual Letter: 2020 Tax Update

McKay Tax Annual Letter 2020 Tax Updates

Most of the COVID-related tax changes were related to the extension of your 2019 tax year filing. However, there are some tax strategies that are still available until the end of the year.  

COVID-19 Tax Strategies Still Available:

 

  • 2020 401k and IRA distributions up to $100,000 can be taken penalty-free and you can pay the regular tax over three years or have it nontaxable if you make a re-contribution (“put it back”) within three years rather than the normal 60 days.  
  • Minimum retirement account distribution (taxpayers over 70½ years of age) can be ignored for 2020.  
  • If you did not get a stimulus 2020 check and qualified based on your 2020 tax return there is a reconciliation in the 2020 tax return that could give you more money.

2020 Standard Deduction Guidelines:

The new 2020 standard deductions are $12,400 single, $18,650 for the Head of Household, and $24,800 for those filing as Married/Jointly.  The Child Tax Credit remains the same at $2,000 for dependents under 17 and $500 for dependents over 16.

Here are a few things to think about for year-end tax planning:

 Charitable Donations

If you think that you will itemize and you need to make a trip to the DI or Salvation Army do so before December 31st. Be sure to get a receipt and write the items and value of each item on the receipts.  

Some taxpayers strategize by bunching charitable deductions in one year. This means they itemize one year and take the standard deduction the next year.  To do this you would wait to pay your 2020 charity or make 2020 donations.  Instead, make your donations in January 2021 and make any additional 2021 donations by December 31, 2021, to include your donations in one year. This will give you twice the deduction in one year and allow you to take the standard deduction on your off year.  

You could also do this with other itemized deductions, such as medical expenses if you can manage them into a specific calendar year.  

Without itemization, you can deduct a maximum of $300 if you gave it to a qualifying charity.

IRA Deduction

Depending on your income, you may be able to get a deduction for an IRA contribution for 2020 of up to $6,000 (or $7,000 if you are over 50 years old). Your IRA deduction will count even if you wait until tax filing day in 2021 (Thursday, April 15, 2021).  

If you are over 70½ years old and choose to take a 2020 distribution from your IRA account, you can make that distribution payable to the charity of your choice tax-free. 

Stock Sales

If you have a few underperforming stocks that you wouldn’t mind unloading, now is the time. If you have them, you can sell your stocks at a loss to offset any capital gains you may have for profitable stock sales throughout the year. If you end up with a capital loss, you can carry that loss for later years and even write off up to   $3,000 against your normal income for the year.

Flex-Spending Accounts

This time of the year is when employees must specify how much salary they will set aside in Flex Spending Accounts (section 125) for medical and child care expenses.  

Using flex funds to pay for medical and child care expenses save federal and state taxes but also saves an additional 7.65% in FICA and Medicare taxes.  Be sure to estimate medical and child care expenses low. Extra money left in your Flex Spending Accounts at the end of the year is lost.

Retirement

Please call me for the answers to your questions about early distributions from a retirement fund or planning your retirement. A simple phone call may save thousands of dollars in additional taxes and penalties. 

As always feel free to call me anytime for answers to your tax questions (including major events) at no additional cost.  Look for your appointment confirmation and questionnaire to come in the mail by January 5th or sooner. 

Have a Merry Christmas and Happy New Year!

Sincerely

Rich McKay

801-731-1857

RMcKay@McKayTax.com

 


How Your Tax Rates Have Changed from 2019 to 2020

How Your Tax Rates Have Changed from 2019 to 2020

Taxes change from year to year, and for some, it may seem entirely different while others may view it as almost the same.  That’s why we thought we’d put together a little list of what changes to expect for your 2020 taxes.

First, let’s review what your tax rates are for 2019.

2019 federal income tax brackets

For taxes due in April 2020, or in October 2020 with an extension

Tax rate Single Married, filing jointly Married, filing separately Head of household
Standard Deduction  12,200  24,400  12,200  18,350
10% $0 to $9,700 $0 to $19,400 $0 to $9,700 $0 to $13,850
12% $9,701 to $39,475 $19,401 to $78,950 $9,701 to $39,475 $13,851 to $52,850
22% $39,476 to $84,200 $78,951 to $168,400 $39,476 to $84,200 $52,851 to $84,200
24% $84,201 to $160,725 $168,401 to $321,450 $84,201 to $160,725 $84,201 to $160,700
32% $160,726 to $204,100 $321,451 to $408,200 $160,726 to $204,100 $160,701 to $204,100
35% $204,101 to $510,300 $408,201 to $612,350 $204,101 to $306,175 $204,101 to $510,300
37% $510,301 or more $612,351 or more $306,176 or more $510,301 or more

Now, here are the tax rates and changes you can expect for 2020.

2020 federal income tax brackets

For taxes due in April 2021

Tax rate Single Married, filing jointly Married, filing separately Head of household
Standard Deduction  12,400  24,800  12,400  18,650
10% $0 to $9,875 $0 to $19,750 $0 to $9,875 $0 to $14,100
12% $9,876 to $40,125 $19,751 to $80,250 $9,876 to $40,125 $14,101 to $53,700
22% $40,126 to $85,525 $80,251 to $171,050 $40,126 to $85,525 $53,701 to $85,500
24% $85,526 to $163,300 $171,051 to $326,600 $85,526 to $163,300 $85,501 to $163,300
32% $163,301 to $207,350 $326,601 to $414,700 $163,301 to $207,350 $163,301 to $207,350
35% $207,351 to $518,400 $414,701 to $622,050 $207,351 to $311,025 $207,351 to $518,400
37% $518,401 or more $622,051 or more $311,026 or more $518,401 or more

If you have any questions about these changes or additional changes from year to year, hop over to our Contact page and reach out to us.


McKay Tax Annual Letter: check these 2019 tax items off by December 31

McKay Tax Annual Letter: check these 2019 tax items off by December 31

Dear Client,

2018 was the first year that people filed under the new tax law (Tax Cut and Jobs Act).

Here are some interesting facts from McKay Tax client tax filing last year:

  • Over 50% of you that itemized in 2017 used the standard deduction in 2018.
  • Over 95% of you paid fewer taxes for 2018 than you did in 2017.

Briefly, here is what you can expect for 2019 deductions

  • Standard deductions are $12,200 single, $18,350 for the head of household, and $24,400 for married jointly.
  • The Dependent & Child Tax Credit remains the same at $2,000 for dependents 16 and under, and $500 for dependents 17 and over.

Here are a few things to think about for year-end tax planning:

Charitable Donations

If you think that you will itemize and you need to make a trip to the DI or Salvation Army do so before December 31st. Be sure to get a receipt and write the items and value of each of the receipts.  Some taxpayers strategize by bunching charitable deduction into one year.  This allows them to itemize one year and take the standard the next year.  For example, donate 2019 charity in January 2020 rather than now, in December.  Make your final 2020 charity donations later in 2020 which will give you twice the deduction in one year – allowing you to itemize a greater value in 2020 and use a standardized deduction in 2021.  You could also do this with other itemized deductions.

IRA Contributions

If you are over 50 years old and wait until tax filing day in 2020, you may be able to get a deduction for an IRA for 2019 of up to $6,000 or $7,000.  If you are over 70 ½ years old and are required to take a 2019 minimum distribution from your IRA account then you can make the distribution payable to your favorite charity and have it not be taxable.

Selling Stock

If you have a few underperforming stocks that you wouldn’t mind unloading, now is the time! By selling an underperforming stock, you may be able to wipe out any capital gains from the year for any positive stock sales, plus another $3,000 in income.

Flex Spending Accounts

This time of the year is when employees must specify how much salary they will set aside in flex spending accounts (section 125) for medical and child care expenses.  Using flex funds to pay for medical and child care expenses save on Federal and State Taxes. You can also save an additional 7.65% in FICA and Medicare taxes.  Be sure to estimate medical and child care expenses low since extra money left in the accounts at year-end is usually lost.

Retirement

Please call me for the answers to your questions about early distributions from a retirement fund or planning your retirement. A simple phone call may save thousands of dollars in additional taxes and penalties.

As always feel free to call me anytime for answers to your tax questions (including major events) at no additional cost.

Look for your appointment confirmation and questionnaire to come in the mail by January 5th or sooner.

Have a Merry Christmas and Happy New Year!

Sincerely

Rich McKay


Important Filing Due Dates To Remember for 2020 Tax Forms

2019 Tax Form Due Dates

Can you believe it is that time of year again!  I’ve comprised a list of the tax forms and their due dates for 2020.  On the left, you’ll find the form type and on the right, you’ll see the date the form needs to be filed for the 2019 tax season.

We know that can be confusing, so let’s reiterate that: These are 2020 dates for 2019 tax forms regarding the 2019 tax year.

As always, if you have any questions feel free to jump over to our Contact page and reach out to us.

Tax Form

2020 Filing Due Date
(for Tax Year 2019)

Form W-2 & certain 1099-Misc (electronic or mail) January 31st
Form 1065 – Partnerships March 16th 
Form 1120-S – S Corporations March 16th 
Form 1040 – Individuals April 15th
FinCEN 114 – FBAR (will be allowed to extend) April 15th
Form 1041 – Trusts and Estates April 15th
Form 1120 – C Corporations April 15th 
Form 990 series – Tax Exempt Organizations  May 15th 
Form 5500 series – Employee Benefit Plan July 31st
Form 1065 Extended Return September 15th
Form 1120-S Extended Return September 15th
Form 1041 Extended Return September 30th
Form 1120 Extended Return October 15th
Form 1040 Extended Return October 15th
FinCEN 114 (Extended with Form 1040) October 15th
Form 5500 series – Employee Benefit Plan Extended Return October 15th
Form 990 series – Tax Exempt Organization Extended Return November 16th

 


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Q2 Tax Due Dates

Important Tax Dates for 2019 Q2

April 1

File with the IRS if you’re an employer that will electronically file 2018 Form 1097, Form 1098, Form 1099 (other than those with an earlier deadline) and/or Form W-2G.

If your employees receive tips and you file electronically file Form 8027.

If you’re an Applicable Large Employer and filing electronically, file Forms 1094-C and 1095-C with the IRS. For all other providers of minimum essential coverage filing electronically, file Forms 1094-B and 1095-B with the IRS.

April 15

If you’re a calendar-year corporation, file a 2018 income tax return (Form 1120) or file for an automatic six-month extension (Form 7004) and pay any tax due.

Corporations pay the first installment of 2019 estimated income taxes.

April 30

Employers report income tax withholding and FICA taxes for the first quarter of 2019 (Form 941) and pay any tax due.

May 10

Employers report income tax withholding and FICA taxes for the first quarter of 2019 (Form 941) if you deposited on time and fully paid all of the associated taxes due.

June 17

Corporations pay the second installment of 2019 estimated income taxes.


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Tax Tips For The First-Time Filers In Ogden And Layton

Tax Tips For The First-Time Filers In Ogden And Layton

There are 21 different institutions of higher learning within a mere 50 miles of Ogden, Utah. Many of the students attending Weber State University, Stevens Henager College, Broadview University Layton, and other schools will be filing their own taxes for the first time in their young lives.

If you’re among one of those first-time tax filers, don’t panic: We’re here to help. These tips can help you glide through the tax-filing process with ease.

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About Qualified Business Income Deductions For Freelancers In Salt Lake City

About Qualified Business Income Deductions For Freelancers In Salt Lake City

If you’re a freelancer in Salt Lake City, you know that it’s important not to leave money on the table when you do your taxes.

Enter the Qualified Business Income (QBI) deduction. While the Tax Cuts and Jobs Act of 2017 that made some sweeping changes to American taxes have been criticized for being most favorable to big business, the QBI is actually aimed at the smaller entrepreneur and self-employed individual. Here’s what it means for you.

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Why You Should Hire Your Spouse And Kids For The Family Business In Ogden, Roy, Or Clearfield

Why You Should Hire Your Spouse And Kids For The Family Business In Ogden, Roy, Or Clearfield

If you’re like a lot of other small business owners in Utah, your family means a lot to you. You’ve worked hard to create an enterprise that will provide for your family’s needs — hopefully, well into the future.

Well, why not put your family to work for you? If you haven’t done it before, the new tax laws that went into effect due to the Tax Cuts and Jobs Act (TCJA) makes it an even better idea than ever!

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Self-employed In Ogden? These Are The Tax Tips You Need

Self-employed In Ogden? These Are The Tax Tips You Need now on McKay Tax blog

Ogden, Utah, has a lot to offer entrepreneurs. From its beautiful historic architecture on 25th street and loads of gorgeous mountain scenery to its comfortable affordability and housing, freelancers and other self-employed professionals have every reason to love the city and all its surrounding locations. It’s the perfect place to launch your business and turn your dreams into a livelihood.

However, tax problems can derail your plans before you get very far if you make a serious mistake — and taxes for the self-employed can be complicated. At tax time, a lot of self-employed people start having their friends who only have a few W2s to file (and we don’t blame them).

Let’s talk about some of the most important things you need to know about your taxes if you’re self-employed.

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