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A-1 Tax and More LLC, 63 Maple Ridge Drive, Cartersville, GA (2026)

03/11/2020

Effective vs. Marginal Tax Rates – Did You Know?

Do taxpayers belonging to the “22% tax bracket” actually pay federal income taxes equal to 22% of their earnings? The answer is no, and the explanation lies in the difference between marginal and effective (or average) tax rates. First off, you only pay income tax on your taxable income, which is your adjusted gross income minus any allowed deductions. Next, each IRS tax rate only applies to the portion of your taxable income that falls within that bracket.

For example, the 2019 tax rates for a single taxpayer included 10% for incomes up to $9,700, 12% for incomes over $9,700, and 22% for incomes over $39,475, with next rate (24%) kicking in at $84,200. Suppose your 2019 total income is $87,000, but your taxable income is only $68,000. Your marginal tax rate (the highest tax rate that applies to you) is then 22%. You will pay 10% on your first $9,700 of income, 12% tax on the part of your income in the $9,700–$39,475 range, and 22% tax on the part of your income in the $39,476–$68,000 range. This all adds up to $10,819 in income tax, or about 12.4% of your total income. So 12.4% is your effective tax rate—the percent of your total income you actually lose to federal income tax.

A tax advisor can help you estimate your effective tax rate so you can better plan your 2020 budget. Remember that in addition to federal income taxes, you may also pay F**A (Social Security and Medicare), state, and local taxes.

03/09/2020

IRS Raises Starting Age for Required IRA Distributions – Did You Know?

The 2019 SECURE Act raised the age at which traditional IRA holders must begin taking annual required minimum distributions (RMDs) from 70 ½ to 72 years. If you have a traditional IRA and turned 70 ½ in 2019, you must still take your 2019 RMD by April 1, 2020. However, if you were under 70 ½ years of age on December 31, 2019, you do not need to begin receiving RMDs until the year when you turn 72. Note that this change does not affect the minimum age to withdraw from a traditional IRA without penalty, which remains at 59 ½ years.

Because the SECURE Act was signed into law near the end of December 2019, some banks may have sent out incorrect notices about RMDs in January 2020. If you turn 70 ½ in 2020 and received a notice from your traditional IRA manager that you must take a 2020 RMD, you should receive a correction notice by April 15, 2020 stating that no RMD is due this year. An experienced tax professional can help you determine when you must take your first RMD, and how to best follow up with your IRA manager if you believe you received an incorrect notification.

03/04/2020

Refund Amounts - Did You Know?

If your refund amount is different than stated on the filed tax return, part or all of your refund may have been used to pay off (offset) past-due federal tax, student loans, state income tax or other past-due debts.

You'll receive a notice from the IRS if such an offset occurs that will show the original tax refund amount, the offset amount, as well as the name, address and telephone number of the agency receiving the payment.

03/02/2020

2019 Available Above-the-Line Tax Deductions and Credits – Did You Know?

Even if you don't itemize deductions, you may be eligible to claim multiple above-the-line deductions and/or tax credits on your 2019 federal tax return. Above-the-line deductions reduce your tax by lowering your taxable income. Tax credits are directly subtracted from your total tax for the year, and some are even refundable if your resulting tax is less than zero. Here is a quick checklist of major above-the-line deductions and tax credits for tax year 2019:

Above-the-Line Deductions:

- Student Loan Interest
- Tuition and Fees Deduction (NOTE: This deduction was originally discontinued by the Tax Cuts and Jobs Act of 2017, but was reinstated for tax years 2018, 2019 and 2020.)
- Educator Expense Deduction
- Health Care Savings Account (HSA) Contributions
- Standard IRA Contributions
- Qualified Business Income (QBI) Deduction

Tax Credits:

- Earned Income Credit
- Child Tax Credit / Credit for Other Dependents
- Credits for Care of Children, Other Dependents or the Elderly or Disabled
Premium Tax Credit (for health insurance obtained through an Affordable Care Act insurance exchange)
- American Opportunity and Lifetime Learning Education Expense Credits
- Adoption Credit
- Credit for Prior Year Alternative Minimum Tax
- Residential Energy Efficiency Credit

If you are self-employed or operate a small business, you may qualify for additional deductions for business and home office expenses. A tax professional can help you identify all of the deductions and credits that you are entitled to for 2019.

02/29/2020

Penalties You Can (And Can't) Avoid with a Tax Filing Extension – Did You Know?

If for any reason you will not be able to file your 2019 federal tax return by the April 15, 2020 due date, you can avoid some—but not all—penalty charges by requesting a filing extension. Most taxpayers can receive an automatic extension of up to six months simply by submitting IRS Form 4868.

Taxpayers who file after the deadline without requesting an extension are subject to the late filing penalty. For returns filed no more than 60 days late, this penalty is typically a small percentage of any tax owed. However, returns filed more than 60 days after the April 15 deadline without an extension are subject to the Minimum Late Filing Penalty. Passed by Congress at the end of 2019, the SECURE Act increased the penalty to the lesser of $435 or 100% of tax owed for returns due in 2020 (this includes, for example, individual returns for 2019).

Most importantly, remember that requesting an extension does not eliminate the risk of penalties for late payment of your taxes. In most cases, 2019 taxes paid after April 15, 2020 will be subject to late fees that accrue monthly. Therefore, if you file for an extension, you should include payment for any tax you expect to owe for 2019. Speak with your tax professional to decide whether requesting an extension is the best option for you, and how much to pay when you submit your request.

02/20/2020

Schedules You May Need for Your 2019 Form 1040 – Did You Know?

Many taxpayers were surprised to learn that they needed to include multiple numbered schedules with their 2018 federal Form 1040s. Since the IRS has now combined some of these schedules, there are fewer numbered schedules overall for 2019. However, as a result of this consolidation, the 2019 schedules are longer and more complex.

To avoid having your 2019 return rejected by the IRS as incomplete, pay careful attention to whether you need to add one or more of these schedules to your Form 1040:

- Schedule 1 (Additional Income and Adjustments to Income). Use this form to report non-wage income like business income, alimony and unemployment compensation. You must also file this schedule to claim various above-the-line deductions, such as educator expenses, qualified IRA contributions and student loan interest.

- Schedule 2 (Additional Taxes). Taxpayers must complete this schedule if they owe taxes other than ordinary income or capital gains tax, including self-employment tax, alternative minimum tax, tax on retirement account transactions or payroll taxes for household employees. (Combines Schedules 2 and 4 from tax year 2018.)

- Schedule 3 (Additional Credits and Payments). Use this schedule to claim tax credits such as the Credit for Child and Dependent Care Expenses, Education Credits (American Opportunity and Lifetime Learning) and the Premium Tax Credit (Affordable Care Act). You must also file this schedule if you made 2019 tax payments other than paycheck withholding, such as quarterly estimated tax payments. (Combines Schedules 3 and 5 from tax year 2018.)

Several of the lines on these schedules may require completion of additional schedules and forms. You may also need to file one or more lettered schedules (such as Schedule B for interest and dividend income or Schedule C for business income). An experienced tax pro can help you make sure you have completed all schedules that apply to your circumstances.

02/18/2020

Where's My Refund?

The IRS provides a "Where's my Refund" (https://www.irs.gov/refunds) tool to check the status of your refund. The "Where's my Refund" tool is updated once daily, usually overnight. Your status is generally available within 24 hours upon the IRS receiving your e-filed return and 4 weeks after mailing your paper return.

If you are claiming the Earned Income Tax Credit or Additional Child Tax Credit, your refund won't be released by the IRS until mid-February. The IRS expects the first EITC/ACTC related refunds to be available in bank accounts or on debit cards by the first week of March, if you chose direct deposit and there were no other issues with the tax return.

02/13/2020

Scammers and IRS Impersonation - Did You Know?

The IRS has issued alerts about scammers are continuing to contact taxpayers. Among the most common are phone calls and fake emails. Thieves use the IRS name, logo or a fake website to try and steal money from taxpayers.

Any first contact from the IRS will typically come in the mail.

Please note that the IRS will never:

- Call to demand immediate payment using specific payment method such as a prepaid debit card, gift card or wire transfer
- Threaten to immediately bring in local police or other law-enforcement groups to have you arrested for not paying
- Demand payment of taxes without giving you the opportunity to question or appeal the amount owed
- Ask for credit or debit card numbers over the phone

For information on how to report scams or phishing attempts, visit http://IRS.gov/phishing.

02/10/2020

New W-4 Form for 2020 – Did You Know?

The IRS has made a number of changes to Form W-4, the Employee Withholding Certificate, for tax year 2020. Most employers require employees to complete a Form W-4 in order to receive paychecks. Here are four key facts to remember about the new-look form:

- If you provided a W-4 to your employer in a previous year and are happy with your current withholding amount, you do not need to submit a new W-4 in 2020.
- If you start a new job in 2020, or wish to submit a new W-4 to your current employer to adjust your withholding, you must use the new 2020 form.
If your tax situation is simple (for example, one job, no dependents), you may provide your personal information and filing status in Step 1 of the form, and then skip down and sign the form in Step 5.
- Steps 2, 3 and 4 of the form are intended for those with more complex tax situations, such as couples with two incomes, workers with multiple jobs, and those with non-employee income (self-employment or “gig” work, interest, dividends, etc.).

For privacy protection and the most accurate withholding, use the IRS Tax Withholding Estimator link, found below, in conjunction with Form W-4. This tool helps you calculate any needed adjustments to your paycheck withholding. After using the Estimator, enter the recommended increase to your withholding on W-4 line 4(c), or the recommended deduction from your withholding on line 4(b). A qualified tax pro can help you determine which information to enter into the Estimator to get the most reliable result possible.

IRS Tax Withholding Estimator: https://www.irs.gov/individuals/tax-withholding-estimator.

02/06/2020

Year-End Transactions Can Change Your 2019 Tax Refund

Now is the time to prepare to file your 2019 tax return, and the IRS is reminding taxpayers that certain end-of-year financial transactions might have significant tax impacts. Tax withholding from paychecks does not ordinarily take into account income sources like yearly or holiday bonuses, stock dividends, or selling real estate or other property at a profit. If you receive such income, you might end up getting a smaller tax refund than you have been anticipating, or even owing tax and penalties for underpayment.

In addition, the IRS reminds taxpayers that if they have outstanding debts like unpaid taxes from previous years, past-due child or spousal support, or overdue student loan payments, their 2019 tax refunds might be reduced by these amounts under the Treasury Offset Program (TOP).

An experienced tax pro can help you determine the tax implications of income you received late in 2019.

02/03/2020

2020 Mileage Rate Increase

Starting on Jan. 1, 2020, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

- 57.5 cents for every mile of business travel driven, a decrease of one half of a cent from the rate for 2019.
- 17 cents per mile driven for medical or moving purposes, a decrease of 3 cents from the rate for 2019.
- 14 cents per mile driven in service of charitable organizations.

You may also have the option of calculating the actual costs of using your vehicle rather than using the standard mileage rates.

01/30/2020

Reduce Fees & Penalties - Did You Know?

You should still file your taxes, even if you can't pay, as the failure-to-file penalty may be 10 times more than the failure-to-pay penalty. If you are unable to pay in full, try to file your tax return and pay as much as you can.

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