Changes in the tax regulations you need to watch out for in 2020 – Part 1

Every year IRS either amends or comes up with new laws for individual tax filing. Keeping up with these changing tax laws every year can be difficult, but it is incredibly essential. As the tax filing season is fast approaching, you might want to brush with all the changes that the IRS has made for the year 2020.

Here are a few significant changes that were made for the tax filing 2020:

Economic impact payment:

If you have received any economic impact payment, it would not be considered taxable income for tax purposes.
However, it does reduce your recovery rebate credit.

Recovery rebate credit:

Though the credit is calculated as the previous year’s economic impact payment, these credit amounts would be based on the 2020 tax year instead of the 2019 tax year (even tax year 2018
when the tax information of 2019 was unavailable). $1,200 will be the maximum credit and $2,400 if you are married. Also, an additional $500 for each qualifying child.

Form 1040-NR revision:

IRS has revised the Form 1040-NR to follow the pattern of the Forms 1040 and 1040-SR closely. From the start of 2020, Form 1040-NR would have Schedules 1, 2, and 3.

Reporting estimated tax payments online 26:

The estimated tax payments and any amounts applicable were reported on Schedule, line 8, in 2019. But, in 2020, you would need to report these estimated tax payments on Form 1040/ 1040-SR, line 26.

Increase in standard deduction amount:

IRS has increased the standard deduction amount for the years 2020 for all tax filers. Here are the standard deduction amount for different category filers:

• $12,400 for single or married filing separately
• $24,800 for married filing jointly or qualifying widow(er)
• $18,650 for Head of household

Virtual Currency

You should answer the question on page 1of Form 1040 or 1040-SR if you have been a part of a virtual currency transaction in 2020. Don’t get confused as this question was on Schedule 1 in 2019
form.

Deductible IRA contributions:

A tax filer need not be younger than age 701/2 to file for deductions for your contributions to an IRA.

Sick and family leave credits for eligible self-employed individuals

According to the FFCRA (Families First Coronavirus Relief Act), self-employed individuals impacted by coronavirus are given help by offering paid sick and family leave credits, which are equal to what employers are required to provide their employees. These credits would be issued for qualified sick leave and family leave wages from the period between April 1, 2020, and December 31, 2020.

There are more changes than the ones mentioned above to the 2020 years tax filings. Please read the ‘Changes in the tax regulations you need to watch out for in 2020 – Part 2’ blog to learn about more changes.