February 2020 E-Newsletter

February 2020 Q & A

Q: I made a major calculation error in favor of the IRS on last year's tax return. Can I file an amended return?

A: You can file an amended return for individual taxes if you make a mistake in either your favor or the IRS's up to three years after the filing date (with extensions) for the tax year in question. To get the ball rolling, file a Form 1040X, Amended U.S. Individual Income Tax Return. State clearly the reason for your amended return. If your mistake was on a business tax return, there are various forms needed to amend tax returns. A tax professional can tell you more.

Q: I'm getting ready to prepare and file my 2019 tax return and heard I could open a traditional IRA this year and deduct contributions from last year's income on my tax return. Is that true?

A: Anyone with earned income can open a traditional or Roth IRA before the tax filing deadline and contribute up to $6,000 for 2019 ($7,000 if over age 50), but they must qualify by income to get a tax deduction on a traditional IRA. (You can't deduct contributions to a Roth.) The deductibility phases out at different income levels depending on your filing status and whether you or your spouse has a qualified retirement plan at work.

REFUND STATS

Ever wonder how other Americans fare with their refunds during tax season? According to IRS statistics based on returns filed through April 19 of last year, the average tax refund was $2,725 for tax year 2018, a drop of $55 from the previous tax year. An important aside: If you expect a refund anywhere near this large for 2019, you should probably adjust your withholding exemptions for 2020.

BIG BUMP

Yes, your Social Security check really was lighter in January if you also have Medicare Part B. This year's Part B monthly premium costs you $144.60, up from $135.50 in 2019, if you earned $87,000 or less and filed taxes as an individual or married filing separately. The income threshold if you file jointly is $174,000. Rates rose similarly for Medicare recipients with higher earnings. Part B deductibles also rose from $185 to $198.

EMPLOYER COSTS UP

Employers' compensation costs in the private sector increased 2.7% year over year by the end of September 2019. Increases were as low as 0.7% for those in the information sector and as high as 3.5% for construction workers.

EDUCATION PAYS

In the third quarter of 2019, full-time workers age 25 and older had median weekly earnings of $975. Learning leads to earning. Those without a high school diploma earned a median of $606 weekly, while high school graduates earned $749 and workers with some college or an associate's degree earned $874. A bachelor's degree resulted in median weekly earnings of $1,281. Workers with advanced degrees (master's, professional or doctoral) earned $1,559 in the third quarter of 2019.

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