I know it’s only February and here I am talking about tax season, but April is right around the corner. Preparing for taxes can be time-consuming especially when managing your family. The more time you have to get your documents organized, the better shape you will be in so you don’t have to frantically file your returns last minute. To help you with your preparation, this article provides a quick checklist of items you need for filing 2019 returns and changes in 2020 to help you adjust your tax savings strategies now.


Here is a quick checklist on what information you will need to gather for filing your tax returns:

  Personal information including social security number

  Last year’s state and federal tax returns

  W2 forms

  Bank account statements

  Retirement account statements

  Charitable contributions

  Medical information including Form 1095, social security benefits and receipts for reimbursed medical expenses

  Education expenses

  1099 forms for income received from investments and work you were contracted

  Property taxes and mortgage interest (1098) documentation

  If you own an investment property you will need a list of your rental income each month and all of your expenses each month. I like to use stessa.com to track everything.

  If you own a business, itemized receipts (We have a spread street to track all of our business expenses including mileage but speak with your CPA to see what is deductible)


Definition of Key Tax Terms

Completing your tax returns can be complicated, but here are a few key terms that are usually thrown around when talking about taxes that are important to know.

  1. Tax rate is the percentage at which you are taxed[i].
  2. Marginal tax rate is the highest rate that applies to your income[ii]. For example, if you are married and brought in $50k of combined income, using the tax rate table below you will have a 12% marginal tax rate. If you made over $78,950 your marginal tax rate would be at 22%.
  3. Tax deduction lowers the amount of a person’s income that the government is able to tax[iii]. For example, if your family brings in $50k of income and you have $10k in deductions. You are only taxed on $40k. In this example, you take your savings and multiply it by your marginal tax rate. That would $10k x 12% for a tax savings of $1,200.
  4. Tax exemptions are similar to deductions in that they lower a person’s income that the government is able to tax.
  5. Tax credit is an amount of money that taxpayers can subtract from their taxes owed, which make it more favorable than deductions and exemptions[iv]. For example, if you have a $10k tax credit, that saves you in $10k in taxes.


How to Calculate your Taxes

The following table shows you the tax rates for 2019[v]. I’m going to do my best to simplify and explain how to use this chart to calculate your taxes.

Tax Rate Income of single taxpayers or married filing separately Income of married couples filing jointly Income of heads of households
37% > $510,300 >$612,350 > $510,300
35% >$204,100 >$408,200 >$204,100
32% >$160,725 >$321,450 >$160,700
24% >$84,200 >$168,400 >$84,200
22% >$39,475 >$78,950 >$52,850
12% >$9,700 >$19,400 >$13,850
10% <$9,700 <$19,400 <$13,850


The US tax system is progressive, which means the percentage that your income is taxed increases as your income increases. For example, let’s say you are married filing jointly and make $50k a year. You are in the 12% tax bracket. That does not mean you are taxed 12% on $50k. Rather, your income is taxed on a scale. That means you pay 12% on your income greater than $19,400 up to your $50k which is $30,600 ($50k-$19,400= $36k). You then pay 10% on the remaining $19,400.


12% of 30,600 =$3,672
10% of 19,400 = $1,940
Total taxes owed = $5,612

Tax Changes for 2020 that Could Benefit You if You Plan Ahead Now

I know you are busy running around and may not have heard about some of the changes to the tax code for 2020 [vi]. However, these changes are important for you to know as we begin the new year so that you can take advantage of these benefits now for next year’s tax returns.

Unfortunately, these changes will not help you when filing your 2019 taxes but you should consider making adjustments now to optimize in tax savings for 2020. In 2020 you can:

  • Contribute $19,500 to your employee 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plans. up from $19,000 in 2019. That means you can save an additional $500 a year into your employee savings plans. The 2020 catch-up contribution limit increased to $6,500 from $6,000 in 2019 (for participants age 50 and older).
  • Contribute $6,000 in total contributions to traditional and Roth IRAs, which is the same as in 2019. $7,000 if you’re age 50 or older.
  •  Put in $2,750 to your FSA healthcare plans. Now is the time to increase your contributions to your FSA plan if it makes sense for you.
  • Take out $270 a month in pre-tax dollars towards transportation and parking, if you are a commuter.
  • Receive up to $14,300 of qualified adoption expenses if you are in planning to adopt this year.