Many people are still focused on the 2019 tax year. With the IRS offering an extension due to COVID-19 which gives people until July 15, 2020, to file, thinking about 2020 taxes seems so far off. But it’s not too early to start planning for next year.
Our team at the Tax Crisis Institute has information for you to keep in mind this year to be better prepared when filing for 2020 comes around.
What Is The Tax Deadline?
This year, everything is different. With the tax deadline for 2019 pushed, many people are wondering what that means for 2020. If you work for a company, they are taking out taxes based on what you requested when you completed your W-4 forms.
For people who are self-employed, investors, and people who receive income from sources other than an employer, quarterly estimated tax payments are required. This is for both federal and state in which the person lives, but each state sets its own requirements.
Quarterly taxes are normally due on April 15, June 15, September 15, and January 15, 2021, but with the COVID-19 pandemic, the federal government and states have extended various tax deadlines for additional financial flexibility.
Federally, quarterly estimated taxes are due July 15 for both the first and second quarter of 2020, again due to COVID-19. Most states have followed suit, but some still followed the traditional dates of April 15 and June 15, making two quarterly estimated tax payments due before the tax year 2019 income taxes are due on July 15th.
So here is a breakdown of dates to remember if you have to file quarterly estimated taxes:
- July 15: 1st and 2nd quarter of 2020 estimated tax payments due
- July 15: 2019 income taxes are due (filing date extended)
- September 15: 3rd quarter estimated tax payments due
- January 15, 2021: 4th quarter estimated tax payments due
- April 15, 2021: 2020 income taxes due
Keep in mind this year has been unprecedented with changes and there could be more. It may sound like a lot of dates to remember and a lot of changes so if you are confused or have any questions, contact us at Tax Crisis Institute today.
If you don’t have to worry about making quarterly estimated tax payments and just want a head start on making sure you are set for the 2020 tax deadline of April 15, 2021, read on for some additional important information.
What Does 2020 Look Like For You?
So you want to get a head start and make sure you are ready for 2020 taxes to come next year? Good for you! It’s best not to wait until the last minute and scramble, especially when it comes to dealing with the IRS and taxes so take these steps now.
One of the first things you can do is make a folder. This could be either on your desktop if you prefer to do everything electronically, a hard copy if that method works for you or both. In that folder, put everything that comes in throughout the year regarding taxes.
This will prevent the tax time scramble when you are trying to find everything you need. And it will make sure you don’t forget anything important. A lot of tax information comes at the end of the year, but you never know when something will come through. Your tax professional will thank you.
Items to keep track of for individuals include:
- Medical bills
- Local taxes
- Retirement contributions
Small business owners should also include any travel expenses or mileage driven.
Understand Your Tax Strategy
Think about the year ahead and anything that you know is coming up that could affect your tax burden.
- Do you plan on buying a house?
- Do you plan on starting a business?
- Do you plan on changing jobs?
A lot of things you do in life will affect your tax status. Even though things may come up that you don’t plan, being prepared with what you can save you a lot of hassle come tax time next April.
Adjust Your Withholdings
Make sure your W-4 is up to date with your employer. With tax law changes and the IRS updating withholding tables, many people discovered they actually owed money when they expected a refund.
By not updating their W-4, they ended up with a surprise bill. Even if you’ve kept the same withholding amount for years, make sure it accurately reflects your current status and financial needs. Finding out you owe money when you thought you were going to get a refund is avoidable with a quick check.
Fund Your Retirement
When you are reviewing your W-4, take some time to also look at your retirement contributions. You can contribute to traditional retirement accounts tax-free, meaning they lessen your tax burden now. You can also withdraw money from Roth accounts tax free in retirement.
Make sure your retirement needs to match your lifestyle and overall tax and financial requirements.
Understand Dependent Rules
Claiming a dependent can make a big difference to your taxes. Understand the rules and differences if you share custody of a child or help to support an elderly parent. Dependent status can make a big difference between receiving a refund or owing so make sure you know ahead of time what a dependent’s status is for the year.
Understand The Impact Of Selling Assets
Selling a home may come with tax sticker shock depending on how long you lived in the home. There are exceptions such as buying a new home or job transfer requirements that may lessen the tax burden.
Also, consider stocks and other capital assets and how they’ve increased in value. Consider keeping those past one year to pay fewer capital gains based on tax rates.
Contact Tax Crisis Institute
It may sound like a lot to remember throughout the year when tax time for 2020 isn’t until April 15, 2021 (unless you pay quarterly estimated taxes). That’s why our team at Tax Crisis Institute is here to help you now. Get the head start on 2020 taxes and contact us today.