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, […]

Fed Keeps Interest Rates Steady

At the last regularly scheduled meeting of the year, the Federal Reserve kept steady the Fed Funds Rate at the conclusion of their FOMC meeting today. The rate is currently a target range of 1.50% to 1.75%.

Banks maintained their same Prime Rates at 4.75%.

In 2020, the Federal Reserve’s Federal Open Market Committee (FOMC) plans to hold its meetings on January 28-29, March 17-18, April 28-29, June 9-10, July 28-29, September 15-16, November 4-5, and December 15-16.

 


December 11, 2019

Federal Reserve issues FOMC statement

For release at 2:00 p.m. EST

Information received since the Federal Open Market Committee met in October indicates that the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although household spending has been rising at a strong pace, business fixed investment and exports remain weak. On a 12‑month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee decided to maintain the target range for the federal funds rate at 1‑1/2 to 1-3/4 percent. The Committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective. The Committee will continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures, as […]

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 […]

Prime Rate Lowered To 4.75%

After today’s .25% rate decrease in the target range for the Fed Funds Rate, banks adjusted their Prime Rates with a corresponding decrease from 5.00% to 4.75%. These changes are effective for most banks tomorrow, October 31, 2019.

In addition to interest rate decreases for commercial loans and credit cards, expect rate decreases in many consumer loans which are based upon the Prime Rate – for instance home equity loans, car loans, and personal loans.

FOMC Cuts Fed Funds Rate Again

The Federal Reserve lowered the Fed Funds Rate 1/4 point at the conclusion of their FOMC meeting today. The rate will now be a target range of 1.50% to 1.75%.

Banks are expected to lower the Prime Rate to 4.75% tomorrow.

 


October 30, 2019

Federal Reserve issues FOMC statement
For release at 2:00 p.m. EDT

Information received since the Federal Open Market Committee met in September indicates that the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although household spending has been rising at a strong pace, business fixed investment and exports remain weak. On a 12-month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 1-1/2 to 1-3/4 percent. This action supports the Committee’s view that sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective are the most likely outcomes, but uncertainties about this outlook remain. The Committee will continue to monitor the implications of incoming information for the economic outlook as it assesses the appropriate path of the target range for the federal funds rate.

In determining the timing and size of future adjustments to the target range for the federal funds rate, […]