IRS Announces 2020 Tax Filing Season Starting January 27, 2020
By Rafique S. M. Ahmed
The new tax filing season is just around the corner. The Internal Revenue Service has announced the first day of processing of the individual income tax returns for the 2019 tax year will be Monday, January 27, 2020. The deadline for filing your 2019 tax returns is Wednesday, April 15, 2020.
More than 150 million individual tax returns for the 2019 tax year are expected to be filed before the traditional April tax deadline. The IRS Commissioner, Chuck Rettig is strongly encouraging all taxpayers to consider filing electronically and choosing direct deposit into your bank accounts since it is fast, accurate, safe and the best way to get your refund as quickly as possible.
There were no new tax laws introduced or enacted for the 2020 tax season. The Tax Cuts and Jobs Act was the last major revision to the US tax system, signed into law in December 2017 and enacted in 2018 making the last tax season of 2019 as the most complicated tax season for more than thirty years. Since the Tax Cuts and Jobs Act will remain in force with no major changes until a new US President is elected, hopefully the upcoming tax season for 2020 should be a little smoother for all tax professionals having survived the worst tax season in US history and gaining one year's exposure and practical experience.
Recognizing the IRS's shortcomings mainly due to budget constraints, the US Congress did pass the Taxpayer First Act which was signed into law on July 1, 2019 mandating the IRS to improve and implement 23 comprehensive provisions to IRS procedures focusing on the way it operates the services it provides, its organizational structure, the way it trains its employees, the technology it uses, etc. The IRS definitely needs to prioritize to improve its services ASAP.
According to a recent report of the National Taxpayer Advocate, IRS received approximately 100 million telephone calls in 2019, unfortunately only 29% of the calls were answered by the IRS representatives. Wait time to talk to the IRS also increased from 24 minutes to 38 minutes. IRS is also struggling in collecting unpaid taxes on an annual average of $381 billion.
In order to prevent the growing identity theft refund frauds, the IRS used a new refund fraud filter 'X' which flagged and stopped the processing of nearly 1.1 million tax returns with refunds in 2019. After a long delay, more than half of those refunds were eventually paid. Taxpayers were crying 'bloody murder' for the indefinite delay. After the Tax season, the IRS found that 71 out of every 100 tax refunds stopped by the IRS's fraud filters were ultimately determined to be legitimate. By law, the IRS cannot issue refunds to people claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before mid-February. The law requires the IRS to hold the entire refund giving it more time to detect and prevent fraud.
The following are the significant changes enacted for 2019 which will have a profound impact on your tax returns:
- Standard deduction has increased to $24,400 for Married Filing Jointly, $18,300 for Head of Household and 12,200 for taxpayers filing as Single or Married Filing Separately.
- Medical and dental expenses exceeding 10% of Adjusted Gross Income are deductible regardless of taxpayer's age.
- Foreign earned income maximum exclusion for 2019 increased to $105,900.
- Social Security Tax will be computed at 6.2% up to a maximum wage limit of $132,900, an increase of $4,500 over the last year.
- Standard mileage rate for business use of vehicle increased in 2019 to 58 cents per mile. The rate for medical care and moving also increased to 20 cents per mile. Mileage rate for charitable causes did not change and is still 14 cents per mile.
- 5 out of 7 Tax Brackets for both Married Joint Filers and Single Filers were slightly reduced for 2019.
- Some business assets placed in service between September 27, 2017 and January 1, 2023 will qualify for 100% Bonus Depreciation in 2019 tax year. The assets cannot have a life of more than 20 years to qualify for 100% bonus depreciation.
- The 100% Bonus Depreciation rule applies to heavy SUVs, Trucks and Vans that are used more than 50% for business.
- In order to avoid under withholding of Federal taxes, IRS has introduced a new W-4 form which does not work off allowances.
- IRS has also changed the K-1 Forms for Partnership and S Corporation Returns with the partnership/shareholders capital reporting requirements effective next year.
- The unpopular Shared Individual Responsibility Payment has been eliminated for the tax year 2019.
- Beginning July 1, 2020, all new applicants desiring to register as a tax preparer with CTEC (California Tax Education Council) will be required to pass a criminal background check and submit fingerprint images to CTEC.
(Rafique S.M. Ahmed is a professional Tax Accountant and has been providing accounting and tax services in California for more than thirty-five years. He is also an Authorized IRS Electronic Filing Provider. His office, Automated Tax & Financial Services is located at 1109 Via Verde, San Dimas, California 91773. Rafique Ahmed can be reached at (909)599-1412 or (909)374-7617.
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