Posted by Larry Hurt

How to Pay Your Tax Bill in 2020

How to Pay Your Tax Bill in 2020

Tax Day 2020 is Wednesday, April 15 and before you even know it, it’s already here. We all know that one of the most stressful days for most Americans is tax time and that’s just about two months from now. Fortunately, the tax code has been simplified by the tax reform legislation in 2017 and your tax savings may further increase because of the changes for the taxes you file in 2020.

Here are the things you need to know in order to pay your tax bill in 2020:

1. Double Check Your Information

You must first know the right address for your employers. You may miss important tax document delivery if you changed your residence without putting in a change of address. Your W2 and other tax documents must be postmarked by January 31 as this is required by the IRS which means by now, you should already receive your tax documents. Just give the IRS a call to follow up if you didn’t receive anything.

2. Prepare Your Documents

It would be best if you prepare your tax documents early, as in today. Personal information such as your dependents, income, investment documents, business and self-employment records, receipts for medical bills and charitable donations are necessary. Make sure you don’t forget anything by creating a checklist.

3. Find Out Your 2019 Tax Bracket for Filing in 2020

Due to inflation, tax brackets change regularly. This is why you need to understand your tax bracket or the range of taxable income you fall into. When you minus your applicable tax deductions with your adjusted gross income, you will get your taxable income. Your bracket will only make sense if you know what deductions are available to you.

4. Identify Eligible Itemized Deductions

Among those eligible deductions that were changed and eliminated by TCJA is the personal deduction which was previously $4,050. These changes may make it difficult to itemize your deductions so you can save more money. If you want to benefit from itemizing, make sure your personalized deductions are greater than your standard deduction. For instance, for married couples filing jointly, their itemized deductions must be more than $24,400.

You can write off the following eligible deductions on your 2019 taxes:

    •    Medical expenses

    •    Charitable donations

    •    Mortgage interest

    •    Mortgage insurance premiums

    •    State and local taxes

    •    Personal property taxes

5. Get Available Credits

There is a difference between tax credits and deductions. Your taxable income is being lowered with deductions while tax credits directly affect the tax amount you owe. The amount is being reduced by these two, dollar for dollar.

Your tax liability can only be reduced to zero for nonrefundable tax credits while you can receive a refund of the excess amount with refundable tax credits. 

What are the most popular tax credits?

Even though tax credits can reduce your owed tax amount, you still need to specifically meet qualifications such as the established AGI limits. For instance, Shiela is a single filer so her AGI must be below $32,501 to qualify for the Saver’s Credit if she wants to qualify for the Saver’s Credit. The basis on whether Shiela can claim 10%, 20% or 50% of her contribution is her AGI. For married filing jointly and head of household filers, other limits are applicable as well.

If you want to know whether you qualify for any of the following popular tax credits, be sure to review their criteria for eligibility:

    •    Adoption Credit

    •    American Opportunity Credit and Lifetime Learning Credit

    •    Child Tax Credit

    •    Child and Dependent Care Credit

    •    Earned Income Tax credit

    •    Residential Energy Efficient Property Credit

    •    Saver’s Credit

The most important thing you need to remember when paying your tax bill in 2020 is to never be late. When you do, you’ll expose yourself to identity theft. There are taxpayers, later on, to find out someone else has already done their taxes just after they filed their tax return. File your taxes early if you don’t want to be susceptible to it.

You will pay your taxes whether you like or not so don’t put it off because the IRS will run after you anyway. Your credit will badly get hurt if you don’t pay your taxes. You also have a few options if you need help paying your taxes such as requesting for an extension, applying for an installment agreement, or using an alternate payment method.

Larry Hurt
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