2018 and 2019 were big years for tax changes. The Tax Cuts and Jobs Act had major implications for individuals and businesses. In 2020, overall, we will see much less change but it’s important to ensure you’re taking advantage of these changes properly in 2020. Here are 5 tax tips for 2020 tax season to get you started in the right direction!
1. Tax Estimator
The IRS tax withholding estimator can help you get a preliminary estimate for your taxes for 2020. However, it’s important to note that there are many variables, so a knowledgeable tax accountant can ensure all factors are considered. You can use the IRS Tax Estimator by clicking here. You should gather the following documents before you begin:
- Most recent paystubs for you, and if married, your spouse too.
- Documents from all sources of income
- Most recent income tax return
2. Maximizing Your Retirement Account Contributions
If you didn’t maximize your contributions in 2019, you have until April 15, 2020 to make a contribution. As always, our #2 tax tip for 2020 is to maximize your contribution for the most tax benefit.
This year, many experts are suggesting considering whether a Roth IRA would be a suitable option as well. Here is a chart to see if you’re eligible to contribute to a Roth IRA.
3. Home Office Tax Deductions
In the past, many taxpayers have avoided the home office tax deduction, because they thought it would be a red flag for an audit. But, if you legitimately qualify for the deduction, it can provide some added benefits. And, the IRS entitles you to deduct a portion of the home expenses (correlating to the square footage where you actually conduct business) for things like rent, utilities, insurance and housekeeping. So, our best advice is to discuss your situation with your tax accountant to see how you can benefit. Our experience suggests that this is still a great benefit for many self-employed filers.
4. Don’t Delay.
Get your paperwork, files and receipts in order now. Filing on time saves you a lot of headache, penalties, additional tax preparation fees, and interest.
5. Get More Organized for 2020 with Apps
There are a ton of digital apps and tools you can use to organize your affairs throughout the year, so that tax time won’t be such a burden. The best tax tip for 2020 is to start planning better today! Here are a few apps to consider:
- MileIQ – lets you passively track all mileage. We suggest using the app weekly or monthly to categorize your drives and mileage for business or personal use. At the end of the year, you can download your history.
- Expensify – easily tracks receipts and manages expenses on your phone.
- Quickbooks – can help you track income and expenses, download statements from your credit card and bank accounts, and more!
Benjamin Franklin said, “Nothing in this world can be certain except death and taxes.” So, we highly recommend tax planning versus tax avoidance!
These tax tips for 2020 will get you started in the right direction, but if you need additional tax help and guidance, Emerald Financial Partners works with individuals and businesses to help you plan appropriately. We specialize in working with self-employed individuals, businesses, and real estate investors! Schedule a consultation from our website and get started today!