Logo

How to make it, spend it, and invest it

21 Aug 2019

The most common tax problems for 2020 By Ralph Carnicer

Download
Post by MoneyRadio Staff

http://at.prod.source-media.psdops.com/list/the-most-common-tax-problems-for-2020

Published
August 13 2019, 4:00pm EDT

We’re roughly halfway through 2019, which means the 2020 tax season will soon be upon us. But rather than wait until next March or April to think about their tax returns, taxpayers — and their advisors — should proactively consider some of the challenges that they could face.

While it’s been more than a year since the Tax Cuts and Jobs Act went into full effect, many Americans are still relatively uncertain of how these changes impact them. The 2020 tax season could be the season that we see old problems resurface and a set of new issues emerge.

Here are some of the common tax problems of 2020 that we should all be aware of.

1. The individual mandate penalty

Almost all of the Tax Code changes stemming from the Tax Cuts and Jobs Act went into effect during 2018. However, a few didn’t become active until this year. The change to the shared responsibility payment is one of these.

The shared responsibility payment, which is commonly referred to as the individual mandate penalty, was previously introduced under the Affordable Care Act. It essentially required people to have some form of health insurance (Obamacare, private or otherwise). If a taxpayer couldn’t prove they had health insurance, they owed a penalty with their taxes.

Starting with the 2020 tax season (fiscal year 2019), there’s no longer a federal penalty. However — and this is where the confusion exists — there are still some state-based penalties. For example, New Jersey, Massachusetts and Washington, D.C., all still have some form of penalty in place. Taxpayers will need to be cautious in this regard and do their research.

2. Changes to retirement contribution limits

Starting with this year, taxpayers are able to stash away more money in tax-advantaged retirement accounts, which could allow individuals to lower their tax burden. Here’s a breakdown of the changes:

  • The 401(k) base contribution is up to $19,000 (it was $18,500 in 2018);
  • The 401(k) catch-up contribution remains unchanged at $6,000;
  • The IRA base contribution (whether Roth or traditional) is up to $6,000 (it was $5,500 in 2018); and,
  • The IRA catch-up contribution remains unchanged at $1,000.

While these may not seem like major increases, they’re important. The $500 increase in IRA contribution limits is especially noteworthy, as these limits hadn’t budged since 2013.

This article is suggested reading by Secured Financial Services, LLC and President and Chief Executive Officer of Secured Financial Solutions, LLC, Anil Vazirani. Please visit https://secured-financial-solutions.com/

Retire and Stay Retired Safe! Smart! Secure!

Based in Scottsdale, Arizona, Secured Financial Solutions is one of the leading financial service firms in Arizona, catering to the financial planning needs of retirees and pre-retirees.

One of the benefits you can count on when working with one of our financial advisors is an outstanding personal relationship with an advisor. As a client, you will deal directly with a financial advisor who will take the time to understand your situation, objectives, estate planning, and retirement planning needs as well as your risk tolerance. We work directly with other advisors as well as CPAs, attorneys and trustees, to ensure that the investments we make will align with your estate plans, and that you are not faced with heavy tax burdens.

You can expect Secured Financial Solutions to develop comprehensive solutions to your complex wealth management and estate planning needs. Our one-on-one approach helps you achieve your financial planning goals, including maximizing your estate, retirement planning, minimizing your tax obligation, and continuing your family legacy. Our investment advisors will work with your CPA, attorneys, and other trusted professionals to help you make intelligent choices that align with your financial and personal goals.

This article is suggested reading by Secured Financial Services, LLC and President and Chief Executive Officer of Secured Financial Solutions, LLC, Anil Vazirani. Please visit https://secured-financial-solutions.com/

Retire and Stay Retired Safe! Smart! Secure!

Based in Scottsdale, Arizona, Secured Financial Solutions is one of the leading financial service firms in Arizona, catering to the financial planning needs of retirees and pre-retirees.

One of the benefits you can count on when working with one of our financial advisors is an outstanding personal relationship with an advisor. As a client, you will deal directly with a financial advisor who will take the time to understand your situation, objectives, estate planning, and retirement planning needs as well as your risk tolerance. We work directly with other advisors as well as CPAs, attorneys and trustees, to ensure that the investments we make will align with your estate plans and that you are not faced with heavy tax burdens.

You can expect Secured Financial Solutions to develop comprehensive solutions to your complex wealth management and estate planning needs. Our one-on-one approach helps you achieve your financial planning goals, including maximizing your estate, retirement planning, minimizing your tax obligation, and continuing your family legacy. Our investment advisors will work with your CPA, attorneys, and other trusted professionals to help you make intelligent choices that align with your financial and personal goals.