2020 Personal Tax Guide

March 03, 2020

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Introduction: Change May Be Coming

The Tax Cuts and Jobs Act of 2017 (“TCJA”) is in full effect, with some provisions scheduled to expire after December 31, 2025. That being said, some new tax legislation was enacted this past year:

  • The Further Consolidated Appropriations Act was signed into law by President Trump on December 20, 2019, a massive spending measure that enacted an estimated $426 billion in tax cuts for both individuals and businesses. Several tax provisions that had expired at the end of 2017 have been retroactively reinstated for 2018 and extended for 2019 and 2020. One notable law change is that cancelled home mortgage debt on a principal residence of up to $2 million is excluded from taxable income.
  • The Setting Every Community Up for Retirement Enhancement Act (“SECURE”) was included in the spending measure that was enacted in December. This legislation is the first major change for retirement plans and IRAs since the Pension Protection Act of 2006. The following are some of the “headliners” of the new law:
  • Starting in 2020, there is no age limit for someone to make contributions to a traditional IRA. Therefore, anyone who has income from a job or self-employment can make contributions. Prior law capped the age at 70½.
  • For anyone who attains age 70½ after 2019, the required minimum distributions (“RMDs”) do not have to commence before age 72. Prior law specified that the RMDs must begin by the end of the year in which an individual attains age 70½. The first RMD can be postponed until April 1 of the following year.
  • The “stretch” IRA dies! Under prior law, individuals who inherited an IRA or retirement plan could spread their RMDs over their life expectancy. The new law specifies that beneficiaries who inherit an account from a decedent dying after 2019 must empty the account no later than ten years after the decedent’s death. Certain beneficiaries are excluded from this new provision:
  • A surviving spouse, who can roll over an inherited account and treat it as his own.
  • A minor child, but this exception ceases when the child reaches the age of majority. Then, the remainder of the distribution must be completed within ten years of the age of majority.
  • A disabled person, who is unable to participate in any substantial gainful activity due to a medically determined physical or mental impairment.
  • A chronically ill person, who is unable to perform at least two activities of daily living as of the date of death of the IRA owner or plan participant.
  • Any individual who is not more than ten years younger than the deceased participant or IRA owner.
  • The “kiddie tax” was revised under the TCJA to subject the unearned income of children to a tax based on the rates for trusts and estates. This provision was repealed under the new legislation, and the calculation of the kiddie tax reverts to prior law. So, a child’s investment income over a set amount is taxed at the parents’ highest marginal rate. This new law goes into effect starting in 2020, but can be elected for 2018 and 2019.
  • The “Cadillac” tax imposed on businesses that sponsor health plans costing more than $11,200 for individuals and $30,150 for families (2019 thresholds) as well as the 2.3% medical device excise tax has been repealed.

Indeed, there has been no shortage of activity in the tax landscape over the past year, and more changes may be coming.

The big domestic issue for 2020 will be the upcoming presidential and congressional elections. Any changes in which political party will control the White House, the House of Representatives and the Senate will undoubtedly upset the status quo and may have ramifications for the TCJA and other legislation that were previously passed along party lines. Businesses and individuals may want to use 2020 to take advantage of favorable provisions currently in place, including the 21% corporate tax rate, bonus depreciation, and IRC Sec. 179 expensing, as well as the enhanced gift tax exclusion.

Regulators are paying more attention to cryptocurrency, and whether income is properly reported by investors. Enforcement activities are on the rise as virtual currencies are complex assets that are often misunderstood, and can be difficult to trace. As with many advances, threat of corruption and fraud is real. Investors and businesses should be approaching the use of cryptocurrency with caution.

The international arena continues to be of great concern to many individuals and families. The global threat of terrorism, the investigation of Russia over interference with U.S. election proceedings, the uncertainty over the threat of war with North Korea and Iran, as well as potential trade wars resulting from U.S.-imposed tariffs on certain imports continue to be significant issues. The recent outbreak of the coronavirus has impacted many individuals. There is still much uncertainty on whether COVID19 will become a pandemic, and how that will impact families and their day-to-day lives. And of course, global climate change, as evidenced by the devastating wildfires in Australia, is of paramount concern to many families.

Many families with wealth continue to be very concerned about their children’s and grandchildren’s future, and what can be done to sustain and grow their wealth in these uncertain times. Given the impact of new legislation and the current economic and geopolitical landscape, it is extremely important that you pay attention to your financial position so that you can achieve your financial objectives. Specific goals such as retirement planning, managing cash flow, and transferring your family’s wealth to the next generation should be top-of-mind in 2020 and beyond.

We have written this guide to provide you with a tool to identify opportunities to minimize tax exposure, accomplish your financial goals and preserve your family’s wealth. This guide includes all major tax law changes through February 15, 2020. The best way to use this guide is to identify areas that may be most pertinent to your unique situation and then discuss the matter with your tax advisor. It is especially important that you check in with your tax advisor before proceeding with any tax planning transactions this year. As always, our tax professionals will be pleased to discuss any opportunities which might apply to your personal situation.

We wish you and your family a happy, healthy, and successful year!

Marie Arrigo signature - black
Marie Arrigo, MBA, CPA
Tax Partner & Co-Leader Family Office Services
& Leader, Exempt Tax Services
EisnerAmper LLP

2019 Personal Tax Guide
Chapter  Table of Contents– download by chapter
1 Tax Planning Strategies 
2 Tax Rate Overview 
3 Estimated Tax Requirements   
4 Alternative Minimum Tax 
5 Business Owner Issues and Depreciation Deductions 
6 Capital Gains and Dividend Income 
7 Stock Options, Restricted Stock and Deferred Compensation 
8 Small Business Stock 
9 Passive and Real Estate Activities 
10 Principal Residence Sale and Rental 
11 Charitable Contributions 
12 Interest Expense 
13 Retirement Plans 
14 Estate and Gift Tax Planning 
15 Tax Credits 
16 Education Incentives 
17 International Tax Planning and Reporting Requirements 
18 State Tax Issues 
   
 Appendices  
Appendix A 2019 Federal Tax Calendar for Individual Taxpayers
Appendix B 2018 Federal Tax Rate Schedule
Appendix C 2019 Federal Tax Rate Schedule
Appendix D 2018 Maximum Effective Rates
Appendix E 2019 Maximum Effective Rates
Appendix F 2019 Federal and State Tax Returns Due Dates
Appendix G EisnerAmper Tax and Private Business Services Partners and Principles

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Editor-in-Chief: Marie Arrigo

Managing Editors: Daniel Gibson, Tom Hall, Robert Levin, Brent Lipschultz
Co-Editors Gary Bingel, Angela Chen, Christopher Colyer, Denise DeLisser, Jean Jiang, Aaron Lerner

Contributors: Jonathan Acquavella, June Albert, Peter Alwardt, Amanda Ammermen, Benjamin Aspir, Julia Bennetsen, Paul Bleeg, Lina Chan, Edward Choi, Cindy Feder, William Gentilesco, Matthew Halpern, Joseph Held, Cindy Huang, Sue Huang, Seth Komitzky, Cindy Lai, Jeanne Marie Waldman, Holly Wong

This tax guide highlights tax planning ideas that may help you minimize your tax liability. This guide does not constitute accounting, tax, or legal advice, nor is it intended to convey a thorough treatment of the subject matter. The best way to use this guide is to identify those issues which could impact you, your family, or your business and then discuss them with your tax advisor.

The discussion in this guide is based on the Internal Revenue Code as amended through February 15, 2020. Future legislation, administrative interpretations, and judicial decisions may change the advisability of any course of action. Because of periodic legislation changes, you should always check with your tax advisor before implementing any tax planning ideas.

Any tax advice contained in this publication (including any attachments) is not intended for and cannot be used for the purpose of (i) avoiding penalties imposed by the Internal Revenue Code or (ii) promoting, marketing, or recommending any transaction or matter addressed herein.

© Copyright 2020 by EisnerAmper LLP. All rights reserved. This book, or portions thereof, may not be reproduced in any form without permission of EisnerAmper LLP.

About Marie Arrigo

Marie Arrigo is a Tax Partner and Co-Leader of the Family Office Services Practice for the Personal Wealth Advisors Group which provides tax consulting and compliance services to family offices, individuals, trusts and estates, and closely held businesses.