Getting Ready for Tax Season
Feb 29, 2020 07:17AM
by Michael Marmel
There are not many changes in the 2019 tax law (the 2018 Tax Cuts and Jobs Act was the biggest change in 40 years), but there are still a few, some of which benefit the taxpayer.
For seniors: The new 1040-SR is a simplified version of the much larger, more complex Form 1040. It has a larger font size and better color contrast making it easier to read.
For divorced couples: For divorce decrees signed after December 31, 2018, that require alimony payments, the payer will not be allowed a deduction for payments made, nor will the payee be required to claim the alimony as income on their respective tax returns.
For retirement plans: 401k contributions are deductible up to $19,000 and IRA contributions are deductible up to $6,000.
The standard deduction has been increased to $12,000 single; $18,350 head of household; and $24,400 married filing jointly.
State Tax: The state of Illinois has switched from a 5 percent flat rate to a graduated tax rate. Roughly speaking, the new tax rate is 5 percent for those earning under $250,000 and 7.75 percent for those earning more than that. It is important to remember that if someone cannot deduct their property taxes on a federal return, they may still be able to deduct them on a state return.
An accountant spends about 25 or 30 minutes on each tax return, and the average return costs $250 to prepare. That’s $500 per hour. In the face of such a sum, many DIY-types may seek an option to do it themselves. And while we all know about TurboTax, people can actually prepare their taxes for free. Available online, the federal 1040 form in Excel is an excellent option for those with a simple tax return and basic understanding of spreadsheets. Just Google Excel 1040.
For state returns, Google File Form IL-1040. In most cases, the tax form simply requires net earnings from a federal return, property taxes and tuition paid.
While this may not be the way to go for everyone, it is definitely worth entering the information in the Excel tax program to get an idea of what the taxes will be when going to an accountant.
The U.S. Internal Revenue Service never calls anyone on the phone, and no one can go to jail for a tax issue without receiving seven or eight letters about it in the mail first. If someone calls claiming to be the IRS or saying that the cops are on the way unless you give them a credit card, just hang up. It’s the safest thing to do.
Marmel Accounting is located at 4433 W. Touhy Ave., Ste. 525, in Lincolnwood. For more information, visit MarmelAccounting.com.