Tax season 2020 is here: Are you ready? Here’s what you can expect

Tax season 2020 is here: Are you ready? Here’s what you can expect

January 5, 2020

This year’s tax season is kicking off amid much less fanfare than last – which began after a record-long government shutdown – but taxpayers may still encounter some of the same issues if they have not been proactive over the past year.

This marks the second year of filing under the sweeping changes enacted via the Tax Cuts and Jobs Act. Last year, many people did not check their withholding amounts leading into tax season despite the government’s advice to do so. As a result, many people were confused when they received little or no refunds despite having a similar financial situation to the year prior. Some even owed the tax agency for the first time.

And, unless you filled out a new form, your current Form W-4 is still being used. That means you could be in for another surprise unless you adjusted your withholding.

The ultimate goal of proper withholding is to pay so much each month that you neither owe nor are owed come April.

More than half of people would rather get a refund come tax season than have a little extra padding in their regular paycheck.

For more than 40 percent of Americans, their refund will be their largest paycheck of the year.

Last year, however, some people were unpleasantly surprised by smaller or non-existent refund amounts, blaming the tax law for what they perceived as increased burdens.

The government cautioned that the size of your refund does not correlate with your tax liability. The overwhelming majority of people are expected to see a net tax benefit as a result of the passage of the Tax Cuts and Jobs Act.

Overall, the average refund last tax season was about $2,725, as the IRS doled out about 95.7 million checks. It processed about 130.7 million returns as of April.

However, similar to last year, taxpayers hoping to get assistance from a customer service agent may have a hard time, according to a recent report from the National Taxpayer Advocate. Other challenges at the agency that have resulted from decreased funding and staffing levels include heightened refund delay times and problems with the Free File program.

The best way to get your refund as soon as possible? Engage your accountant as early as possible and have then file online. That method often takes about 20 to 30 days for a refund turnaround. Filing early will also diminish the chances that scammers will steal your identity and file a fake return on your behalf – which can seriously delay your refund.

The new Form W-4: What to know to avoid a refund surprise

In December the IRS released its final version of the 2020 Form W-4 (click here to download the form), with some important changes that could impact both employers and workers.

The new form is for use in 2020 – it is intended to make withholding more accurate in conjunction with the Tax Cuts and Jobs Act, which affected filers for the first time last tax season.

Amid those changes, many workers were surprised about their refund amounts – whether they were lower or even non-existent. Incorrectly filling out the new W-4 form could result in similar complications for employees moving forward.

“While the updated form may initially elicit some confusion for employees, these important changes will ultimately simplify the ability to set and adjust withholding to achieve desired results, such as a specific tax refund amount,” Pete Isberg, vice president of government affairs of ADP, said in a statement. “That being said, the form may require employees to remember specifics from their most recent tax return to properly fill out the form and avoid any issues. The 2020 Form W-4 features significant improvements and simplification for those with multiple jobs and two-earner families.”

The ultimate goal of proper withholding is to pay so much each month that you neither owe nor are owed, come April.

Among the big changes to the form are new boxes for workers to check indicating they hold multiple jobs or are part of a two-earner household – simplifying the process on previous forms.

“This is more to alert people to take other sources of income into account,” Ed Slott, CPA and founder of, told FOX Business. “It helps to highlight situations that caused problems last year.”

Slott noted that if people hold two jobs that each pay $20,000, for example, some may be getting taxed at each job at a very low rate because their income appears so low. However, come tax time, they will owe the IRS on the full $40,000 because they may have been short throughout the year.

The same goes for sideline income.

The forms will also shift some calculations onto employers – including converting full-year expected tax credits to reduce per-payroll tax withholding, for example, as noted by ADP’s Isberg.

One area of potential confusion, pointed out by ADP, is an area that asks for “deductions other than the standard deduction” – this will require workers to enter expected deductions over the standard deduction amount, not total deductions. Further, the group notes that in two-earner households, for individuals that opt to check the applicable box in Step 2, both spouses should check the box, but only one needs to fill out Steps 3 and 4 on the form.

It should be noted that employees with current W-4 forms on file with their employers will not need to update their form unless they switch jobs, have a change in personal status or choose to.

An early draft of the withholding form released for public comment was criticized for being too complicated and for asking taxpayers to reveal too much personal information. Multiple other drafts were released and subject to public comment since.

In the meantime, it is important to check and update your withholding amounts if your end-of-year tax refund, or liability, was not what you expected. Your current W-4 will be used until the new one is put on file – meaning any surprises could be exacerbated come April.

Many people did not check their withholding amounts leading into this tax season, despite the government’s advice to do so. People received little, or no refunds, despite having a similar financial situation to the year prior. Some even owed the tax agency for the first time. You can estimate your withholdings by (clicking here) to use the IRS Withholding Calculator.

Do you understand how tax refunds work?

Many taxpayers eagerly await the check they receive from the IRS each tax season – about 70 percent of Americans typically expect to receive one – though many have misconceptions about exactly where that money comes from.

A recent survey from CreditKarma found that while people like getting a refund each year, nearly half of all respondents did not know the refund is a result of overpaying taxes to the federal government.

But for 44 percent of people, it is their biggest paycheck of the year.

That might be because when people overpay, it can be by a significant amount.

The ultimate goal of proper withholding is to pay so much each month that you neither owe nor are owed come April.

Proper withholding is important for another reason – taxpayers who underpay are at risk of facing a penalty. During any given year, taxpayers can avoid the underpayment penalty if they paid withholding and estimated tax of at least 90 percent of the amount owed.

Here are some of the misconceptions Americans had about tax refunds, according to the CreditKarma’s survey:

What is a tax refund?

While 46 percent of respondents knew that tax refund money comes from their own paychecks, an equal percentage of people thought the money was given to them by the government. Four percent said they did not know the origins of refund money.

What does it mean when you get one?

Forty percent of people knew that getting a tax refund means they overpaid income taxes.

About 11 percent of people knew it meant they were essentially giving the government an interest-free loan.

Only 7 percent of people knew that it meant they needed to adjust their withholdings.

Less than 30 percent of survey respondents identified all three of the above items as correct.

On the other hand, 13 percent of people didn’t know any of the aforementioned items were true.

What determines if you get a refund?

More than half of respondents – 51 percent – did not know they could determine whether they get a refund each year by adjusting their withholding amounts. A full 41 percent believed they had no control over their refund.

How much are Americans expecting?

Despite a general lack of knowledge about tax refunds, 46 percent of people were expecting to receive refund checks of $1,000 or more this year. More than half of respondents said they would actually rather get a tax refund when April rolls around than have more money in their paychecks consistently throughout the year. Only 34 percent of people said they would prefer to have proper withholding.

Need help this tax season? Louis Mamo & Company has the personnel in place to help you with all of your personal and business tax needs. Please contact us today to discuss your specific tax situation.

(Sources: The Internal Revenue Service, CreditKarm and Fox Business News).