Little or no knowledge is one of the primary reasons why tax filing is a stressful task for many taxpayers. A survey by the National Endowment for Financial Education shows that 58 percent of US taxpayers are worried about tax filing issues. While you can always take the help of an IRS tax law attorney at the Law Offices of Nick Nemeth, it is advisable to know about the common mistakes to avoid when filing your tax return, which we will discuss in this blog post. Read on.
1. The Individual Mandate Penalty
The changes made to the Tax Code originating from the Tax Cuts and Jobs Act became effective during 2018. Be that as it may, a couple of them didn’t apply until 2020. The shared responsibility payment, also known as the individual mandate penalty was recently introduced under the Affordable Care Act. It basically required individuals to have some kind of health insurance or medical coverage such as Obamacare, or private insurance. In case of failing to provide the medical coverage, the IRS can put up a penalty over not paying your taxes.
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2. Changes to Retirement Contribution Limit
Beginning with this year, citizens can take away more cash in retirement accounts, which could help people to bring down their tax burden. Here are some of the major changes:
- The 401(k) base commitment is up to $19,000 (it was $18,500 in 2018);
- The 401(k) make up for lost time commitment stays unaltered at $6,000;
- The IRA base commitment (regardless of whether Roth or customary) is up to $6,000 (it was $5,500 in 2018);
- The IRA gets up to speed commitment stays unaltered at $1,000
3. Medical Expense Deduction Threshold
In 2010, the Affordable Care Act raised the number of adjusted gross income from 7.5 percent to 10 percent. It was considered significant progress and made it hard for individuals to qualify. In 2017-18, at the time of Tax Cuts and Jobs Act, it was edged down to 7.5 percent again. The news of the medical expense deduction threshold coming back to 10 percent this year is confirmed.
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You need to make sure not to let the tax filing problem escalate. Whether you missed the filing or payment deadline or have incomplete documents, if you have an understanding of how the entire tax system works, it is an advantage for you. If you are facing any IRS tax debt problems, contact the Law Offices of Nick Nemeth to get help. For a no-obligation consultation, simply call (972) 426-2553 or fill out our contact form and we will take it from there.