2020 To Do List: Revisit Your W-4 & Tax Withholdings

The IRS recently overhauled and updated Form W-4 for Tax Withholdings. Since most people tend to complete the form once and forget it, this is the year you may want to complete the new form with your employer when it becomes available so you are good to go for 2020. Many employers have an automated system for submitting an employee’s changes for Form W-4. Please be sure to check with your employer to see if they have this option available.

The IRS also encourages everyone to use the Tax Withholding Estimator to perform a “paycheck checkup.”  This will help you make sure you have the right amount of tax withheld from your paycheck. However, you will need to wait until January to use the IRS estimator for 2020. (The estimator has not been updated yet.) See: https://www.irs.gov/individuals/tax-withholding-estimator

According to the IRS, the new Form W-4 design reduces the form’s complexity and increases the transparency and accuracy of the withholding system. While it uses the same underlying information as the old design, it replaces complicated worksheets with more straightforward questions that make accurate withholding easier for employees. Allowances are no longer used for the redesigned Form W-4. This change is meant to increase transparency, simplicity, and accuracy of the form. In the past, the value of a withholding allowance was tied to the amount of the personal exemption. Due to changes in law, currently you cannot claim personal exemptions or dependency exemptions.

Checking your withholding can help protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time next year. Also, you should always revisit the W-4 if you have major life changes, such as marriage, the birth of a child, […]

IRS Releases 2020 Retirement Contribution Limits

The new retirement contribution limits for 2020 were just released by the IRS.

401(k) contribution limits increased from $19,000 to $19,500 (with catch-up contribution limits increased from $6,000 to $6,500.)

SIMPLE retirement account limits increased from $13,000 to $13,500.

IRA contribution limits remain at $6,000.

See below for details about the $2,000 increase in the Roth phase-out range and other phase-out changes.

 

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IR-2019-179, November 6, 2019

WASHINGTON — The Internal Revenue Service today announced that employees in 401(k) plans will be able to contribute up to $19,500 next year.

The IRS announced this and other changes in Notice 2019-59 (PDF), posted today on IRS.gov. This guidance provides cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2020.

Highlights of changes for 2020

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $19,000 to $19,500.

The catch-up contribution limit for employees aged 50 and over who participate in these plans is increased from $6,000 to $6,500.

The limitation regarding SIMPLE retirement accounts for 2020 is increased to $13,500, up from $13,000 for 2019.

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the Saver’s Credit all increased for 2020.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or his or her spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor his or her spouse is covered by a retirement plan at work, the phase-outs of the deduction do not […]

Why You Should Start Saving Right Now

Business Insider has a great chart that shows how starting your retirement savings at 25 is so much better than at 35. While interest rates for savings accounts and certificates of deposit aren’t great right now, that will eventually change. It’s important to get in the habit of saving now.

See: http://www.businessinsider.com/saving-at-25-vs-saving-at-35-2014-3

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Finding The Best Tax Software For You

Sandra Block at Kiplinger has a good review of the leading tax software products to help you find the best software for your situation. Although, technically most people complete their taxes online and don’t need to download any software. Many even do their returns on tablets or mobile phones. We don’t have our own reviews, but do have links to leading tax preparation solutions if you want to take a look yourselves.

See: http://www.kiplinger.com/article/taxes/T056-C005-S003-best-tax-software-for-you.html

See also: http://www.moneycafe.com/personal-finance/tax-preparation/

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Now You Can Check For ObamaCare Subsidies At eHealthInsurance.com

Looking for affordable healthcare? Want to see if you qualify for an ObamaCare subsidy? eHealthInsurance now has an Affordable Care Act subsidy calculator and is integrated with the Federal Exchange to sell on-exchange QHP plans, aka ObamaCare. These plans are available to people who meet the requirements and are eligible for a subsidy. They also have an Affordable Care Act Resource Center. There are only 2 weeks left to sign-up for ObamaCare, so it’s worth a look.

eHealthInsurance is a great resource for any type of individual, family, or small business health insurance. We have used it ourselves and found it to be very useful in getting the best policies.


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