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Inflation Adjustment: 2020 Tax items of most interest

This just in from Internal Revenue Service (IRS) <irs@service.govdelivery.com> (see web page at https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2020):

The tax items for tax year 2020 of greatest interest to most taxpayers include the following dollar amounts:

  • The standard deduction for married filing jointly rises to $24,800 for tax year 2020, up $400 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,400 for 2020, up $200, and for heads of households, the standard deduction will be $18,650 for tax year 2020, up $300.
  • (ed. The lowest rate is really Zero 0% – a married family which brings in $24,800 or less does not owe any Federal Income tax. You must earn more than $24,800 to be taxable at all.)
  • The lowest rate is 10% for incomes over and above the standard deduction: single individuals with incomes of $9,875  or less and $19,750 for married couples filing jointly. [[ed. to clarify: to owe any tax at all for 2019 a family must earn at least $24,801 – $24,800 is subtracted off as the standard deduction, and 10% tax is owed on the remaining $1, or 10 cents tax total. You must earn $19,751 more than $24,800 to owe 12 cents tax on the $1 over $24,800+$19,750. By comparison the standard deduction in year 2016 was only $12,600 – half as much – so you had to pay 10% tax starting at $12,601 and the next bracket was 15% not 12% and started at only $9,275. See the Forbes article here]]
  • 37% for individual single taxpayers with incomes greater than $518,400 ($622,050 for married couples filing jointly).
  • 35%, for incomes over $207,350 ($414,700 for married couples filing jointly);
  • 32% for incomes over $163,300 ($326,600 for married couples filing jointly);
  • 24% for incomes over $85,525 ($171,050 for married couples filing jointly);
  • 22% for incomes over $40,125 ($80,250 for married couples filing jointly);
  • 12% for incomes over $9,875 ($19,750 for married couples filing jointly).
  • For 2020, as in 2019 and 2018, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act.
  • The tax year 2020 maximum Earned Income Credit amount is $6,660 for qualifying taxpayers who have three or more qualifying children, up from a total of $6,557 for tax year 2019. The revenue procedure contains a table providing maximum credit amounts for other categories, income thresholds and phase-outs.
  • For tax year 2020, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $118,000, up from $116,000 for tax year 2019.
  • For tax year 2020, the foreign earned income exclusion is $107,600 up from $105,900 for tax year 2019.
  • Estates of decedents who die during 2020 have a basic exclusion amount of $11,580,000, up from a total of $11,400,000 for estates of decedents who died in 2019.
  • The annual exclusion for gifts is $15,000 for calendar year 2020, as it was for calendar year 2019.
  • The maximum credit allowed for adoptions for tax year 2020 is the amount of qualified adoption expenses up to $14,300, up from $14,080 for 2019.

US Year 2019 Tax Sample

Obligatory photo of shop kittie inspecting transformers while I try to get work done.

Some taxes, such as Sales Tax and State Unemployment Tax were not included. They might be added later. If you were to live in Texas, there would not be a State Income tax; if you lived in Alaska the State would pay you instead of you paying State Income Tax; if you were living in California or New York, the State Income Tax might be a bit higher (8-9%).

IRS Publication 15 can be downloaded from https://www.irs.gov/pub/irs-pdf/p15.pdf

US Income Taxes for year 2019

Example cases comparing taxes on general laborer wages and engineering wages
Married
$36,000 / year
$3,000/month
Married
$200,000/year
$16,667/month

Comes out of your payroll and is shown on your pay stub

Federal Income Tax – $0->$983 (see note below) 0%  –  –
Federal Income Tax – $983->$2,600 (10%) 10%  $161.70  $161.70
Federal Income Tax – $2,600->$7,563 (12%) 12%  $209.70  $595.56
Federal Income Tax – $7,563->$15,017 (22%) 22%  –  $1,639.88
Federal Income Tax – $15,017->$27,771 (24%) 24%  –  $2,035.88
Federal Income Tax – $27,771-.$35,000 (32%) 32%  –  –
Federal Income Tax – $35,000->$52,013 (35%) 35%  –  –
Federal Income Tax – $52,013 and up (37%) 37%  –  –
Indiana State Income Tax (3.23%) 3.23%  $96.90  $538.34
Federal Insurance Contributions Act (FICA) on paystub 6.20%  $186.00  $1,033.35
MEDICARE Tax on paystub 1.45%  $43.50  $241.67
Additional Medicare Tax on paystub 0.90%  –  $150.00
Total taxes you are told about on your pay stub  $697.80  $6,396.39
Amount you were told you would be paid  $3,000.00  $16,667.00
Amount you were really paid  $2,302.20  $10,270.61
Percent of promised amount you were really paid 76.74% 61.62%

Comes out of your payroll money without your knowing

Federal Unemployment Tax 6%  $180.00  $1,000.02
Federal Insurance Contributions Act (FICA) (yes, again) 6.20%  $186.00  $1,033.35
MEDICARE Tax (yes, again) 1.45%  $43.50  $241.67
Total Taxes You were not told about  $409.50  $2,275.05
Amount you would have been paid without the hidden taxes  $2,711.70  $12,545.65
NOTES: Federal Income Tax is charged based upon how much money is made, not a flat percentage for everyone. Those who earn more money pay ever increasing percentages as Federal Income Tax. The brackets shown here are from Pub 15, page 46, Table 4 MONTHLY Payroll Period.

Year 2018 Tax Returns Statistics Now Available for public review

This just in from IRS via Tax Statistics <irs@service.govdelivery.com>. Citizens may subscribe to receive these notices on IRS page https://www.irs.gov/newsroom/e-news-subscriptions


  1.  Individual Income Tax Returns, Mid-July Filing Season Statistics, Tax Year 2018


A table providing data from individual income tax returns filed through July 25, 2019, for Tax Year 2018 is now available on SOI’s Tax Stats Web page. These data include selected income items, adjustments, credits, and taxes, by size of adjusted gross income (AGI). The data represent approximately 95 percent of all individual income tax returns that the IRS will process in Calendar Year 2019 and the first tax data filed under the Tax Cuts and Jobs Act. The remaining 5 percent of returns will be primarily from taxpayers who have requested a 6-month extension by filing Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return.  Because taxpayers who request an extension generally have more complex finances, on average, those data will represent approximately 87 percent of the total AGI tax liability reported for all individual income tax returns filed during the year.

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  2.  Individual Income Tax Returns with Small Business Income/Losses, Tax Years 2015–2017


New tables for Individual income tax returns that contain small business income or losses for Tax Years 2015–2017 are now available on SOI’s Tax Stats Web page. These tables include income from Schedule C, Profit or Loss from Business, Schedule E, Supplemental Income or Loss, and Schedule F, Profit or Loss from Farming. The information will provide more background and content from the individual business returns, including data on income items, adjustments, credits, and taxes. For 2017, over 42 million individual income tax returns had some small business income and/or losses. Although they represented a little more than a quarter (27.7 percent) of all individual tax returns filed for 2017, these returns accounted for 47.1 percent of adjusted gross income (AGI) and paid 60.4 percent of income tax. For each of the three years of data provided, the largest portion of small business income came from net partnership/S corporation income less losses.


How to Get Prior-Year Tax Information

In email today from Oak Partners:

How to Get Prior-Year Tax Information*
Tax day 2018 has passed – and for American taxpayers, it was one of the last reminders of 2017. The IRS instructs filers to retain tax records and supporting documents for at least the 3 previous years.
Taxpayers who used tax-filing software for the first time and who don’t have copies of their returns may order tax transcripts of previous-year returns from the IRS. The transcripts provide a summary of a tax return.
Taxpayers seeking to obtain transcripts need to have the amount of their adjusted gross income to validate their identities. For more information, go to  Validating Your Electronically Filed Tax Return.
The IRS advises taxpayers to first check with the provider of the tax software they used or their tax preparer before contacting the agency for the information. The IRS charges a fee for providing prior-year returns. The transcripts, however, are free.
It takes 5-10 days to get tax transcripts ordered online or by phone after the IRS receives the request. It takes about 30 days to get tax transcripts ordered by mail and about 75 days for tax returns.
Here are 3 ways to order transcripts:
  1. Go to Get Transcript on the agency’s website.
  2. Taxpayers may call 800-908-9946.
  3. Taxpayers may use Form 4506-T or Form 4506T-EZ to order by mail.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.


Tax Information 2018

From email today from irs@service.govdelivery.com:

The busiest part of tax season begins this week, with millions of people planning to file. Through April 6, the IRS has processed more than 101 million tax returns and issued more than 79.1 million tax refunds totaling $226.6 billion. The average refund to date is $2,864.

Additional filing season numbers:

  • The IRS expects to receive about 14.9 million individual income tax returns for the week ending April 13, with about 13.1 million filed electronically.
  • On top of those 14.9 million tax returns, the IRS expects to receive another 17 million tax returns the following week.
  • Requests for extension are anticipated to exceed 11.6 million by next week, with the vast majority of those Forms 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, being filed electronically. Overall, this year, the IRS expects to receive more than 14 million extension requests from taxpayers.

Information about free e-file options, such as FreeFile, how to request an automatic six-month filing extension or fast and easy ways to pay any tax due using IRS Direct Pay are available online at IRS.gov. IN INDIANA you can access on-line software to file your Federal and Indiana State income taxes for free at https://www.in.gov/dor/5912.htm.