Here are some helpful documents to help you navigate the 2020 tax filing season.
* To file a timely return, the data must be submitted to me at least 30 days prior to the filing deadline. Otherwise, I will electronically file an extension for you and will assess a $50 processing fee.
An extension extends the filing deadline but not the payment deadline. A failure-to-pay penalty and interest will apply to any tax balance due.
Tax Day is April 15, 2021. You must file your 2020 individual tax returns by this date. An extension gives you additional time to file but note that it does not give you additional time to pay. If you have a balance due, you will continue to accrue a late payment penalty plus interest.
Tax Rates and Income Brackets
Here’s a refresher on how tax rates and income brackets: Your tax rate (the percentages of your taxable income that you pay in taxes) is based on what tax bracket (income range) you’re in.
For example, if you’re single and your income is $75,000, then you’re in the 22% tax bracket. But that doesn’t mean your tax rate is a flat 22%. Instead, part of your income is taxed at 10%, another part at 12%, and the last part at 22%.
Tax deductions help lower the amount of income that is subject to federal income taxes. Some deductions are only available if you choose to itemize your deductions, while others (also known as “above-the-line-deductions”) are available even if you take the standard deduction.
Tax credits lower your actual tax bill dollar for dollar, and there are two types of credits: refundable and nonrefundable. If a credit is greater than the amount you owe and its a refundable credit, the difference is paid to you as a refund. Bravo!! But if it’s a nonrefundable credit, your tax bill will be reduced to zero, but you won’t get a refund. That’s still great!
Higher Standard Deductions in 2020
When you pay taxes, you have the option of taking the standard deduction or itemizing your deductions. If you itemize, you calculate your deductions one by one. Itemizing is more work, but it’s worth it if your itemized deductions exceed the amount of the standard deduction.