IRS Releases draft of new simplified new form 1040-SR for Seniors for the 2020 Tax Season

If you are 65 or older (or turn 65 any time in 2019), you will have the option to use a new simple tax form for seniors, known as the 1040SR, when you file your 2019 taxes in April 2020.

The IRS has released a draft of the new simplified tax individual income tax form, Form 1040-SR. The draft of the Form 1040-SR is two pages long. It allows seniors of any filing status to use the form. It also allows senior taxpayers with dependents to use the form. The draft Form 1040-SR allows taxpayers to enter income from wages, salaries, tips, interest, dividends, IRA distributions, pensions and annuities, and social security benefits and to report taxable amounts of IRA distributions, pension and annuities and social security benefits.

The draft Form 1040-SR also provides for reporting capital gains or losses on line 6 and prompts the taxpayer to attach a Schedule D, if required. On line 7(a), Form 1040-SR allows senior taxpayers to report other income that may appear on Schedule 1. Other income reported on Schedule 1 includes alimony and unemployment compensation.

On line 9, the draft Form 1040-SR prompts the taxpayer to enter either the standard deduction or itemized deductions from Schedule A. Taxpayers using Form 1040-SR will be able to claim the qualified business income deduction on Line 10.

The draft Form 1040-SR also allows taxpayers to claim the child tax credit or credit for other dependents, the Earned Income Credit and American opportunity credit.

2019 Earned Income Credit

2019 EITC Income Limits, Maximum Credit Amounts and Tax Law Updates

Earned Income and AGI Limits

The tax year 2019 Earned income and adjusted gross income (AGI) must each be less than:

If filing… Qualifying Children Claimed
Zero One Two Three or more
Single, Head of Household or Widowed $15,570 $41,094 $46,703 $50,162
Married Filing Jointly $21,370 $46,884 $52,493 $55,952

Investment Income Limit

Investment income must be $3,600 or less for the year.

Maximum Credit Amounts

The maximum amount of credit for Tax Year 2019 is:

  • $6,557 with three or more qualifying children
  • $5,828 with two qualifying children
  • $3,526 with one qualifying child
  • $529 with no qualifying children

For more information on whether a child qualifies you for EITC, see:

  • Qualifying Child Rules, or
  • Publication 596, Rules If You Have a Qualifying Child.

2019 IRS Tax Changes

Tax Reform Provisions that Affect Individuals

Standard Deduction Amount Increased

For 2019, those who are married and filing jointly will have a standard deduction of $24,400.

Single taxpayers and those who are married, and file separately now have a $12,200 standard deduction.

For heads of households, the deduction will be $18,350

Insurance Penalty

The penalty for not having health insurance no longer applies for 2019 federal tax returns. However, some states have their own individual health insurance mandate, requiring you to have qualifying health coverage or pay a penalty with your state tax return.

California has a new state individual health care mandate, which takes effect on January 1, 2020, and requires Californians to have qualifying health insurance coverage throughout the year, or pay a penalty based on your income and the number of people in your household.

Summary of possible penalties
Household Size If You Make Less Than You May Pay
Individual $45, 500 $695
Married Couple $91,000 $1,390
Family of 4 $140,200 $2,085

2019 Child Tax Credit

Under the new Tax Cuts and Jobs Act (TCJA) the following child tax credit changes will take place in 2019:

  • The Child Tax Credit under 2019 tax reform is worth up to $2,000 per qualifying child. The age cut-off remains at 17 (the child must be under 17 at the end of the year for taxpayers to claim the credit).
  • The refundable portion of the credit is limited to $1,400. This amount will be adjusted for inflation after 2019.
  • The earned income threshold for the refundable credit is lowered to $2,500.
  • The beginning credit phaseout for the CTC increases to $200,000 ($400,000 for joint filers). The phaseout also applies to the new family tax credit.
  • The child must have a valid SSN to claim the nonrefundable and refundable credit.

Child Tax Credit Eligibility

The child you claim as your dependent has to meet six IRS tests:

  1. Age Test: The child you claim as your dependent must have been under age 17 (so, 16 or younger) at the end of the tax year.
  2. Relationship Test:  The child must be your daughter, son, foster child or adopted child. The child can also be a grandchild or a descendant of one of your siblings.
  3. Support Test: The child must not have provided more than half of their own “support,” meaning the money they use for living expenses.
  4. Dependent Test: The child must be claimed as your dependent on your federal income tax return.
  5. Citizenship Test: The child must be a U.S. citizen, a U.S. national or a U.S. resident alien.
  6. Resident Test: The child must have lived with you for more than half of the tax year (with a few exceptions detailed on the Child Tax Credit worksheet).

In addition to these six tests, income is also an eligibility factor. As your modified adjusted gross income (MAGI) increases, the child tax credit begins to phase out. You’ll get $50 less in child tax credits for every $1,000 – or portion of $1,000 – that your modified AGI exceeds:

  • $75,000 if you’re filing as the head of your household, single or as a qualifying widow(er)
  • $110,000 if your filing status is married filing jointly
  • $55,000 if your filing status is married filing separately

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Retirement Topics – Required Minimum Distributions (RMDs)

Required Minimum Distributions (RMDs)

You cannot keep retirement funds in your account indefinitely. You generally have to start taking withdrawals from your IRA, SIMPLE IRA, SEP IRA, or retirement plan account when you reach age 70½. Roth IRAs do not require withdrawals until after the death of the owner.

Your required minimum distribution is the minimum amount you must withdraw from your account each year.

You can withdraw more than the minimum required amount.Your withdrawals will be included in your taxable income except for any part that was taxed before (your basis) or that can be received tax-free (such as qualified distributions from designated Roth accounts).

Calculating the required minimum distribution

The required minimum distribution for any year is the account balance as of the end of the immediately preceding calendar year divided by a distribution period from the IRS’s “Uniform Lifetime Table.”

To calculate the required amount you may click the following links:

What is an enrolled agent?

An enrolled agent (EA) is a federally-authorized tax practitioner who has technical expertise in the field of taxation and who is empowered by the U.S. Department of the Treasury to represent taxpayers before all administrative levels—examination, collection, and appeals—of the Internal Revenue Service. In addition to taxpayer representation, enrolled agents often provide tax consultation services and prepare a wide range of federal and state tax returns. “

2017 Tax Filing Season Begins Jan. 23 for Nation’s Taxpayers, Tax Returns Due April 18

The Internal Revenue Service announced today that the nation’s tax season will begin Monday, Jan. 23, 2017, and reminded taxpayers claiming certain tax credits to expect a longer wait for refunds.

The IRS will begin accepting electronic tax returns that day, with more than 153 million individual tax returns expected to be filed in 2017. The IRS again expects more than four out of five tax returns will be prepared electronically using tax return preparation software.

Many software companies and tax professionals will be accepting tax returns before Jan. 23 and then will submit the returns when IRS systems open. The IRS will begin processing paper tax returns at the same time. There is no advantage to filing tax returns on paper in early January instead of waiting for the IRS to begin accepting e-filed returns.

The IRS reminds taxpayers that a new law requires the IRS to hold refunds claiming the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) until Feb. 15. In addition, the IRS wants taxpayers to be aware it will take several days for these refunds to be released and processed through financial institutions. Factoring in weekends and the President’s Day holiday, the IRS cautions that many affected taxpayers may not have actual access to their refunds until the week of Feb. 27.

“For this tax season, it’s more important than ever for taxpayers to plan ahead,” IRS Commissioner John Koskinen said. “People should make sure they have their year-end tax statements in hand, and we encourage people to file as they normally would, including those claiming the credits affected by the refund delay. Even with these significant changes, IRS employees and the entire tax community will be working hard to make this a smooth filing season for taxpayers.”

The IRS also reminds taxpayers that they should keep copies of their prior-year tax returns for at least three years. Taxpayers who are changing tax software products this filing season will need their adjusted gross income from their 2015 tax return in order to file electronically. The Electronic Filing Pin is no longer an option. Taxpayers can visit IRS.Gov/GetReady for more tips on preparing to file their 2016 tax return.

April 18 Filing Deadline 

The filing deadline to submit 2016 tax returns is Tuesday, April 18, 2017, rather than the traditional April 15 date. In 2017, April 15 falls on a Saturday, and this would usually move the filing deadline to the following Monday — April 17. However, Emancipation Day — a legal holiday in the District of Columbia — will be observed on that Monday, which pushes the nation’s filing deadline to Tuesday, April 18, 2017. Under the tax law, legal holidays in the District of Columbia affect the filing deadline across the nation.