2021 FILING SEASON CHANGES FOR 2020 TAX RETURNS

2021 FILING SEASON CHANGES FOR 2020 TAX RETURNS

2021 FILING SEASON CHANGES FOR 2020 TAX RETURNS



2021 FILING SEASON CHANGES FOR 2020 TAX RETURNS

  1. Increased Standard Deduction
  2. Income Tax Brackets & Tax Rates
  3. 401k Contribution Limits
  4. AMT Exemptions Increased
  5. HSA Contribution Limits
  6. Virtual Currency Question Location Change
  7. Above the Line $300 Charitable Contribution Deduction
  8. Federal Income Tax Withheld Reporting
  9. Stimulus Checks (Economic Impact Payment)
  10. Deductible IRA Contributions
  11. Self Employed Individuals
  12. Schedule LEP


Increased Standard Deduction
For the 2021 tax season, the standard deduction amounts will be increased slightly as in previous years. The new amounts for 2020 tax returns are below. The increased standard deduction will continue to allow more individuals to file without itemizing deductions on Schedule A.
FILING STATUS STANDARD DEDUCTION AMOUNT
Single & Married Filing Separate (MFS)$12,400
Head of Household$18,650
Married Filing Joint (MFJ)$24,800
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Income Tax Brackets & Tax Rates
For 2020 tax returns, there are still seven (7) tax rates. They are: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Below are tables depicting how the brackets look by filing status:
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Individual Taxpayers
If Taxable Income Is Between: The Tax Due Is:
0 - $9,87510% of taxable income
$9,876 - $40,125$987.50 + 12% of the amount over $9,875
$40,126 - $85,525$4,617.50 + 22% of the amount over $40,125
$85,526 - $163,300$14,605.50 + 24% of the amount over $85,525
$163,301 - $207,350$33,271.50 + 32% of the amount over $163,300
$207,351 - $518,400$47,367.50 + 35% of the amount over $207,350
$518,401 + $156,235 + 37% of the amount over $518,400

Married Individuals Filing Joint Returns and Surviving Spouses
If Taxable Income Is Between: The Tax Due Is:
0 - $19,75010% of taxable income
$19,751 - $80,250$1,975 + 12% of the amount over $19,750
$80,251 - $171,050$9,235 + 22% of the amount over $80,250
$171,051 - $326,600$29,211 + 24% of the amount over $171,050
$326,601 - $414,700$66,543 + 32% of the amount over $326,600
$414,701 - $622,050$94,735 + 35% of the amount over $414,700
$622,051 + $167,307.50 + 37% of the amount over $622,050

Heads of Household
If Taxable Income Is Between: The Tax Due Is:
0 - $14,10010% of taxable income
$14,101 - $53,700$1,410 + 12% of the amount over $14,100
$53,701 - $85,500$6,162 + 22% of the amount over $53,700
$85,501 - $163,300$13,158 + 24% of the amount over $85,500
$163,301 - $207,350$31,830 + 32% of the amount over $163,300
$207,351 - $518,400$45,926 + 35% of the amount over $207,350
$518,401 + $154,793.50 + 37% of the amount over $518,400

Married Filing Separately
If Taxable Income Is Between: The Tax Due Is:
0 - $9,87510% of taxable income
$9,876 - $40,125$987.50 + 12% of the amount over $9,875
$40,126 - $85,525$4,617.50 + 22% of the amount over $40,125
$85,526 - $163,300$14,605.50 + 24% of the amount over $85,525
$163,301 - $207,350$33,271.50 + 32% of the amount over $163,300
$207,351 - $311,025$47,367.50 + 35% of the amount over $207,350
$311,026 + $83,653.75 + 37% of the amount over $311,025

401k Contribution Limits
401K contributions limits have been increased to $19,500 and $6,500 for taxpayers over age 50 making catch-up contributions. Taking advantage of these high limits will decrease your taxable income.
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AMT Exemptions Increased
The Alternative Minimum Tax (AMT) exemption amounts have been increased for inflation for 2020, making fewer taxpayers subject to AMT.
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Alternative Minimum Tax (AMT) Exemptions
Filing Status Exemption Amount
Single$72,900
Married Filing Joint (MFJ)$113,400
Married Filing Separate (MFS)$56,700
Trusts & Estates$25,400

HSA Contribution Limits
HSA account contribution limits have increased to $3,550 self-coverage only and $7,100 for family coverage.
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Virtual Currency Question Location Change
The question regarding virtual currency transactions has been moved from Schedule 1 to the top of Form 1040 under the basic taxpayer information.
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Above the Line $300 Charitable Contribution Deduction
Typically, you don't see reference to charitable contributions until Schedule A. However, due to the CARES Act, charitable cash contributions of up to $300 are temporarily above-the-line deductions, claimed directly on Form 1040, line 10b. That means that you do not have to itemize to claim those deductions. The contribution still is subject to the same restrictions and rules for qualification for Schedule A contributions.
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Federal Income Tax Withheld Reporting
Page two of your Form 1040, line 25 (previously line 17) has been spilt up. "Federal income tax withheld from Forms W-2 and 1099" line has been divided into separate lines for withholding for Forms W-2, 1099, and "other."
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Stimulus Checks (Economic Impact Payment)
Every taxpayer who files a return must complete the Recovery Rebate Credit worksheet to determine if they didn't receive enough, didn't receive any or received too much stimulus payment. Taxpayers will be able to claim a refundable credit for amounts not received (i.e. additional baby born, etc.). This credit will be reported on Form 1040, line 30. Amounts overpaid will not be required to be paid back.
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Deductible IRA Contributions
You DO NOT have to be younger than 70 ½ to take a deduction for contributions made to an IRA. The age restriction has been removed.
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Self Employed Individuals
Due to the CARES Act and the FFCRA Act, there are many tax implications for self-employed individuals. These acts permit certain individuals who file Schedule SE or Schedule H to defer the payment of 50% of the social security tax imposed for the period beginning on March 27, 2020, and ending December 31, 2020. They also are eligible for paid sick leave and paid family leave credits equivalent to those that employers are required to provide their employees for qualified sick leave wages and qualified family leave wages paid during the period beginning April 1, 2020, and ending December 31, 2020.
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Schedule LEP
Allows taxpayer to select a language, other than English, to receive written communication from the IRS.
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