48 KIPLINGER’S PERSONAL FINANCE^ 03/2020ISTOCKP
HOTO.COMaccounts. If you’re a single filer and
your 2019 taxable income was less
than $39,375 (or $78,750 if you’re mar-
ried and file jointly), you won’t owe
taxes on gains from stocks or mutual
funds you owned for more than a year.WHAT’S NEW
Also note these changes for 2019:Alimony payments may no longer be
deductible. The tax overhaul elimi-
nated the deduction for alimony for
divorces finalized or modified on or
after January 1, 2019. If your divorce
was finalized or modified before De-
cember 31, 2018, you can still deduct
your payments.A revamp of the “kiddie” tax was repealed.
The tax overhaul changed the way in-
vestment income earned by children
younger than 19 (or full-time students
younger than 24) was taxed. Under
the kiddie tax, a child’s investment in-
come that exceeds $2,200 was sched-
uled to be taxed at the rates that trusts
and estates are taxed, which can run
as high as 37%. After advocates for
military families said the change
would penalize children of deceased
service members, Congress repealed
the change. Investment income earned
by children will generally be taxed
at their parents’ tax rate.The IRS wants to know about your invest-
ments in virtual currency. There’s a new
question at the top of Schedule 1 for
Form 1040: “At any time during 2019,
did you receive, sell, send, exchange,
or otherwise acquire any financial in-
terest in any virtual currency?” The
IRS wants to make sure you’re report-
ing taxable income you earned from
investments in virtual currency, says
Andy Phillips of H&R Block’s Tax In-
stitute. If you sold a virtual currency
for more than you paid for it, you’re
expected to pay taxes on your profits
at capital gains rates, even if you used
it to make a purchase. ■Completing your tax return usually provides a sense of relief, but it can also lead to regrets.
Did you owe the IRS more than you expected? Or was your refund so large you almost
expect to receive a note from the Treasury Department thanking you for your generous
interest-free loan?
In either instance, it’s now easier to figure out how much you’ll owe the IRS when you
file your 2020 tax return. The IRS has overhauled Form W-4—the form you use to tell your
employer how much to withhold from your paycheck—to reflect changes in the Tax Cuts
and Jobs Act. In the past, your withholding was based on the number of allowances you
claimed, and those allowances were based on your personal exemptions. The tax over-
haul eliminated personal exemptions, and the calculation that was confusing to many
taxpayers no longer applies.
The new W-4 form allows your employer to calculate your withholding based on several
factors, including the number of your dependents, family income from other jobs, and
deductions you expect to claim when you file your return. The result should be more pre-
cise than the old system, says Christina Taylor, head of operations for Credit Karma Tax.
All employees hired in 2020 must use the new W-4, says Alice Jacobsohn, senior man-
ager of government relations for the American Payroll Association. Employees who didn’t
change jobs aren’t required to fill out the new form, but if you’re unhappy with the out-
come of your 2019 tax return—or your personal situation has changed since you filed your
last W-4—you probably should.
If you have only one job, no dependents and claim the standard deduction, all you need
to provide is your name, Social Security number and filing status. But if your taxes are
more complex—you itemize, for example—you’ll need to provide more information. An
ideal time to complete this task is right after you’ve finished your 2019 tax return, because
you should have this information at hand.
If you’re a two-earner family, the new W-4 does a better job of calculating how much
you should have withheld. The form also provides a way to adjust your withholding to
reflect income from taxable investments or a side gig. Don’t want your employer to know
you’re moonlighting? Go to http://www.irs.gov/individuals/tax-withholding-estimator to cal-
culate your withholding. You can enter the result on the “extra withholding” line without
revealing any more information about the sources of your income.New Math
Know What You’ll Owe
CONTACT THE AUTHOR AT [email protected].■ ADJUST YOUR
WITHHOLDING
WITH THE NEW W-4.MONEY