8 Ways 2019 Tax Returns Will Change in 2020 Filing Season

Want to know what's in store for 2019 tax returns in the upcoming 2020 filing season? Below is a rundown of the 8 biggest changes that may affect how much you'll owe Uncle Sam on tax day:

Top 2019 Tax Return Changes

1. Tax Rate Changes

There are currently seven federal tax brackets for 2019, ranging from 10% to 37%. While these tax rates themselves haven't changed from 2018, the income amounts in each of the brackets are adjusted each year for inflation. Below is a table listing the tax brackets and rates for the 2019 tax year:

Rate

 For Unmarried Individuals, Taxable Income Over For Married Individuals Filing Joint Returns, Taxable Income Over For Heads of Households, Taxable Income Over
10% $0 $0 $0
12% $9,700 $19,400 $13,850
22% $39,475 $78,950 $52,850
24% $84,200 $168,400 $84,200
32% $160,725 $321,450 $160,700
35% $204,100 $408,200 $204,100
37% $510,300 $612,350 $510,300.00

2. Increased Standard Deduction

As in previous years, for the 2020 filing season, standard deduction amounts will also increase. The higher deduction limits for 2019 tax returns are as follows:

 

Filing Status

Standard Deduction Amount
Single & Married Filing Separate (MFS) $12,200
Head of Household $18,350
Married Filing Joint (MFJ) $24,400

3. New Form 1040-SR Tax Return for Senior Citizens

Included in the passage of the Budget Act of 2018, is a provision that gives senior citizens (those aged 65 and older) their own tax return form, best described as a simplified version of the 1040-EZ. Until now, most seniors had to complete the more complicated form 1040, because they couldn’t meet the income requirements for filing form 1040-EZ. The new 1040-SR form allows senior citizens to claim the standard deduction or itemize their deductions on Schedule A. There are also no income limits or restrictions on the types of income that can be reported

The 1040-SR form is also formatted with seniors in mind. It has larger text and a better color contrast so it is easier on the eyes when reading.

4. Increased 401k and 403(b) Contribution Limits

For 2019 tax returns, the 401K retirement account and 403(b) Tax-Sheltered Annuity contribution limits have been raised to $19,000. Those age 50 or older can contribute an additional $6,000 "catch-up" contribution. These higher limits mean a corresponding decrease in taxable income.

5. Increased IRA Contribution Limits

IRA contribution limits have also increased to $6,000. Those age 50 or older can contribute an additional $1,000 catch-up contribution.

6. Increased AMT Exemptions

The Alternative Minimum Tax ensures that certain wealthy taxpayers, estates, and trusts are paying no less than a minimum amount of tax on their income. The AMT estimates income tax after adding certain tax preference items back into adjusted gross income. The Alternative Minimum Tax (AMT) exemption amounts have been increased for inflation for 2019. The new amounts for the 2020 filing season are as follows:

 

Filing Status

Exemption Amount

Single

$71,700

Married Filing Joint (MFJ)

$111,700

Married Filing Separate (MFS)

$55,850

Trusts & Estates

$25,000

 

7. Increased HSA Contribution Limits

Tax payers with a Health Savings Account (HSA), can now increase contributions to their health care savings so they can accrue interest tax free. In 2019 tax returns, the individual limit has been raised to $3,500, while the family accounts now have a limit of $7,000.

8. New Supplemental Schedules from Six to Three

In 2018, the IRS created six new supplemental schedules that would be used together with form 1040. For 2019 tax returns, those schedules have been redesigned and combined into three larger schedules-- he goal being to streamline the filing process. Drafts of these redesigned schedules can be viewed on the IRS website:

What You Need to Know About the New W-4 Tax Form for 2020

The W-4 tax form is getting a new look in 2020, and it promises to make the whole business of tax withholding much more accurate and much less confusing-- for both employers and their employees. So, if you will be starting a new job in 2020 or need to update your tax withholding status, then here are a few things you should know about the new W-4.

Why is the W-4 Form Changing?

The W-4 tax form, also known as the Employee’s Withholding Allowance Certificate, tells your employer how much federal income tax to withhold from your wages each payment cycle. Until recently, the value of this withholding allowance was linked to the amount of exemptions you claimed. The Internal Revenue Service (IRS) offered two types of exemptions: one personal and the other for dependent children under the age of 18.

Earlier this year, the IRS announced updates to the W-4 tax form since tax exemptions were eliminated with the passage of the 2017 Tax Cuts and Jobs Act. Under the new legislation, you can no longer claim personal exemptions or dependency exemptions. In it's place, standard deduction amounts have nearly doubled for tax years 2018 through 2025.

What is Different in the Updated W-4 Tax Form?

In addition to accounting or changes to tax legislation, the W-4 redesign is also supposed to make the form simpler and easier to complete for employees and ultimately help them to provide more accurate information. In fact, with the old form many employees avoided updating their withholding allowance altogether due to the complicated worksheets they had to work through.

If you are one of these people, then the W-4 will be a breath of fresh air. With the redesign, the confusing worksheet has been eliminated and is replaced with a simple 5-step process as well as a series straightforward questions.

Steps 2 to 4 is where all the changes are. Step 2 is meant for taxpayers working more than one job or who are filing jointly with a spouse who is also working. You only need to complete this step and the following two steps if they apply to you.

In Step 3, you can claim dependent children and other dependents out of your withholding. Step 4 allows you to make other adjustments to your withholding allowance, like having tax withheld for other sources of income.

What Do You Need to Do About the New W-4 Form?

Starting in 2020, if you need to complete a W-4, whether it’s for a change in employment, to account for a life change such as marriage or the birth of a child, or to adjust your withholding amount, you will need to use the updated version. If none of the above applies to you and you already have a W-4 on file with your current employer, then you are not required to fill it in again.

Since form W-4 tells your employer how much federal income tax to withhold from your wages, accurately completing a W-4 form can help ensure you have the right amount of federal income tax deducted throughout the year. This is important because having too little tax withheld from your wages, could mean you end up owing Uncle Sam at the end of the tax year, while withholding too much means you essentially give the US government an interest-free loan for a year.

To help ease the transition to the new W-4 and the changes to the tax legislation that are behind it, the IRS put out several early draft versions of the W-4 form, as well as a FAQs page about the revisions.

There is also a handy Tax Withholding Estimator. This online app walks you through the process of estimating your withholdings and helps you to estimate your upcoming tax refund or obligation based on your current withholdings. You can also get guidance on what you can do to change outcome of your federal income tax return-- i.e either get a refund, end up even, or owe the government come tax day. The app will additionally help you to navigate more complex tax situations, such as what to do with seasonal employment, self-employment income, and income from investments.