Technology advances continue to reshape industries and businesses – and the accounting industry is no exception. So far, a lot of repetitive tasks are performed with the help of advanced hardware and software. Even for businesses that do not like change, many find themselves making adjustments due to a generation change in the workforce, marketing demands, regulations and client demand. In any case, technology offers strengths once a business adopts new solutions to the accounting processes.
The accounting industry has evolved so much that bookkeeping is no longer just about balancing books; professionals in this field are slowly transitioning into strategic business advisors.
Technological innovations offer inexpensive and efficient ways to run businesses and other aspects of life. Every now and then, there is news on emerging technologies.
Here are some tech trends that are expected to influence the accounting industry in the year 2020.
Cloud-Based Accounting
The internet has enabled the storage and processing of data from remote servers. Small- and medium-sized businesses can now leverage the power of the internet and access data and infrastructure without worrying about the cost of purchasing and maintaining hardware and software services on-site. The ease of accessing data anytime and anywhere helps businesses save valuable time. Such benefits will continue driving more businesses to adopting the use of cloud-based accounting systems.
Automation
Automating repetitive tasks has helped eliminate manual data entry while saving production hours at the same time. Since technology continues to advance, the accounting industry will see more tasks become automated. This trend can be observed in the growing number of accounting software available for both small and large businesses. Artificial intelligence will also contribute to automation in the industry. This is already evident with the increased development and adoption of robotic process automation.
Social Media
In the early 2000s, social media platforms were mainly used to communicate with family and friends. Today, social media is making an impact in digital marketing. Social media platforms will continue influencing how businesses communicate with their clients.
Apart from reaching out to more clients, accounting firms can also find talent to hire from social media platforms such as LinkedIn.
Big Data and Data Analytics
With advanced data collection and processing, it’s now possible to have access to insights and predictive analysis. Although analytics is not entirely new in accounting, the availability of data analytics tools makes it more powerful. This is important for business owners as it helps to improve decision making as well as understand the overall status of a company with the click of a button.
Cryptocurrency
This digital currency has revolutionized the financial industry with millions of coins present in the market today, including Bitcoin, Ripple and Ethereum among others. This digital currency has taken root so much that it is now accepted as a means of payment. Cryptocurrency has been enabled by blockchain technology.
Blockchain
For businesses, blockchain technology helps maintain a unique history of all interactions with various parties, which is indisputable. Widely known accounting companies like Ernst Young and Price Waterhouse already have people working in distributed ledger laboratories. The blockchain technology will not only lower the cost of reconciling and maintaining ledgers, but it will also provide accuracy of ownership and asset history.
Remote Working
Remote work settings are becoming common in most industries, and accounting leaders are also adapting this trend. With expectations of more advanced computerized accounting systems as well as cloud-based solutions, it will not be a surprise to have your accountant handling accounting tasks remotely.
In Conclusion
With technology largely affecting how businesses are run, it’s no longer enough for a business to stick to traditional accountancy practices.
As technology and accounting becomes more intertwined, it’s wise for businesses to stay ahead of the curve. The most important way to deal with it is to embrace the technology, learn about new technologies and most importantly, learn new skills. This will ensure that your business remains competitive as you are ready to meet customer demands for faster processes.
Key Technology Trends in Accounting to Watch Out For in 2020
January 1, 2020 · Blog, What's New in Technology
⏱ 4 min read
Technology advances continue to reshape industries and businesses – and the accounting industry is no exception. So far, a lot of repetitive tasks are performed with the help of advanced hardware and software. Even for businesses that do not like change, many find themselves making adjustments due to a generation change in the workforce, marketing demands, regulations and client demand. In any case, technology offers strengths once a business adopts new solutions to the accounting processes.
The accounting industry has evolved so much that bookkeeping is no longer just about balancing books; professionals in this field are slowly transitioning into strategic business advisors.
Technological innovations offer inexpensive and efficient ways to run businesses and other aspects of life. Every now and then, there is news on emerging technologies.
Here are some tech trends that are expected to influence the accounting industry in the year 2020.
Cloud-Based Accounting
The internet has enabled the storage and processing of data from remote servers. Small- and medium-sized businesses can now leverage the power of the internet and access data and infrastructure without worrying about the cost of purchasing and maintaining hardware and software services on-site. The ease of accessing data anytime and anywhere helps businesses save valuable time. Such benefits will continue driving more businesses to adopting the use of cloud-based accounting systems.
Automation
Automating repetitive tasks has helped eliminate manual data entry while saving production hours at the same time. Since technology continues to advance, the accounting industry will see more tasks become automated. This trend can be observed in the growing number of accounting software available for both small and large businesses. Artificial intelligence will also contribute to automation in the industry. This is already evident with the increased development and adoption of robotic process automation.
Social Media
In the early 2000s, social media platforms were mainly used to communicate with family and friends. Today, social media is making an impact in digital marketing. Social media platforms will continue influencing how businesses communicate with their clients.
Apart from reaching out to more clients, accounting firms can also find talent to hire from social media platforms such as LinkedIn.
Big Data and Data Analytics
With advanced data collection and processing, it’s now possible to have access to insights and predictive analysis. Although analytics is not entirely new in accounting, the availability of data analytics tools makes it more powerful. This is important for business owners as it helps to improve decision making as well as understand the overall status of a company with the click of a button.
Cryptocurrency
This digital currency has revolutionized the financial industry with millions of coins present in the market today, including Bitcoin, Ripple and Ethereum among others. This digital currency has taken root so much that it is now accepted as a means of payment. Cryptocurrency has been enabled by blockchain technology.
Blockchain
For businesses, blockchain technology helps maintain a unique history of all interactions with various parties, which is indisputable. Widely known accounting companies like Ernst Young and Price Waterhouse already have people working in distributed ledger laboratories. The blockchain technology will not only lower the cost of reconciling and maintaining ledgers, but it will also provide accuracy of ownership and asset history.
Remote Working
Remote work settings are becoming common in most industries, and accounting leaders are also adapting this trend. With expectations of more advanced computerized accounting systems as well as cloud-based solutions, it will not be a surprise to have your accountant handling accounting tasks remotely.
In Conclusion
With technology largely affecting how businesses are run, it’s no longer enough for a business to stick to traditional accountancy practices.
As technology and accounting becomes more intertwined, it’s wise for businesses to stay ahead of the curve. The most important way to deal with it is to embrace the technology, learn about new technologies and most importantly, learn new skills. This will ensure that your business remains competitive as you are ready to meet customer demands for faster processes.
Disclaimer
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
The SECURE Act of 2019 is a broad bill with the purpose of increasing access to tax-advantaged retirement accounts in order to prevent retirees from outliving their assets. It mostly impacts those already in retirement or close to it.
1. RMD Relief: Previously, IRA and employer-sponsored retirement plan holders were required to start taking Required Minimum Distributions (RMDs) from age 70½ to age 72. This will give retirees more time to let their savings grow tax-free.
2. More Planning Opportunities for Roth IRAs: The change in the RMD age described above means account holders will have an extra two years to do a Roth IRA conversion. This can be important because unlike traditional IRAs, Roth IRAs are not subject to RMDs during the taxpayer’s lifetime.
3. More Chances to Save: Previously tax-deductible IRA contributions were forbidden after age 70½. The SECURE Act gets rid of this restriction, so if you are still earning money in your 70s and onward, you’ll have the opportunity to save into a deductible IRA.
4. Easier for Small Businesses to Establish Retirement Plans: The SECURE Act allows a greater number of small businesses to join up to give employees Multiple Employer Plans (or MEPs) starting in 2021. This eases the administrative burden and costs of offering retirement plans. The hope is that more small employers will begin to offer plans.
5. Guaranteed Income for Life: Employers will now be able to allow employees to change their retirement plan savings into annuities without the fear of a lawsuit being filed against them – in the case the insurer they pick fails to pay the annuity payments.
6. Removes “Stretch” Provisions: Prior to the SECURE Act, traditional IRA beneficiaries typically had to take RMDs over their own life expectancy, extending the tax benefits of the retirement account. Starting on Jan. 1, 2020, the SECURE Act changes this rule. Now, most beneficiaries only have 10 years to liquidate their entire inherited retirement account (with some exemptions, such as surviving spouses and minor children).
The SECURE Act of 2019
January 1, 2020 · Blog, Guest Post of the Month
⏱ 2 min read
The SECURE Act of 2019 is a broad bill with the purpose of increasing access to tax-advantaged retirement accounts in order to prevent retirees from outliving their assets. It mostly impacts those already in retirement or close to it.
1. RMD Relief: Previously, IRA and employer-sponsored retirement plan holders were required to start taking Required Minimum Distributions (RMDs) from age 70½ to age 72. This will give retirees more time to let their savings grow tax-free.
2. More Planning Opportunities for Roth IRAs: The change in the RMD age described above means account holders will have an extra two years to do a Roth IRA conversion. This can be important because unlike traditional IRAs, Roth IRAs are not subject to RMDs during the taxpayer’s lifetime.
3. More Chances to Save: Previously tax-deductible IRA contributions were forbidden after age 70½. The SECURE Act gets rid of this restriction, so if you are still earning money in your 70s and onward, you’ll have the opportunity to save into a deductible IRA.
4. Easier for Small Businesses to Establish Retirement Plans: The SECURE Act allows a greater number of small businesses to join up to give employees Multiple Employer Plans (or MEPs) starting in 2021. This eases the administrative burden and costs of offering retirement plans. The hope is that more small employers will begin to offer plans.
5. Guaranteed Income for Life: Employers will now be able to allow employees to change their retirement plan savings into annuities without the fear of a lawsuit being filed against them – in the case the insurer they pick fails to pay the annuity payments.
6. Removes “Stretch” Provisions: Prior to the SECURE Act, traditional IRA beneficiaries typically had to take RMDs over their own life expectancy, extending the tax benefits of the retirement account. Starting on Jan. 1, 2020, the SECURE Act changes this rule. Now, most beneficiaries only have 10 years to liquidate their entire inherited retirement account (with some exemptions, such as surviving spouses and minor children).
Disclaimer
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
Beginning on Jan. 1, 2020, the Internal Revenue Service (IRS) has new annual inflation adjustments for tax rates, brackets, deductions, and retirement contribution limits. Note, the amounts below do not impact the tax filing you make in 2020 for the tax year 2019. These amounts apply to your 2020 taxes that you will file in 2021.
2020 Tax Rates and 2020 Tax Brackets
Below are the new 2020 tables for personal income tax rates. There are separate tables each for individuals, married filing jointly couples and surviving spouses, heads of household and married filing separate; all with seven tax brackets for 2020.
Tax Brackets & Rates – Individuals
Taxable Income Between
Tax Due
$0 – $9,875
10%
$9,876 – $40,125
$988 plus 12% of the amount over $9,875
$40,126 – $85,525
$4,617 plus 22% of the amount over $40,125
$85,526 – $163,300
$14,605 plus 24% of the amount over $85,525
$163,301 – $207,350
$33,271 plus 32% of the amount over $163,300
$207,351 – $518,400
$47,367 plus 35% of the amount over $207,350
$518,400 and Over
$156,234 plus 37% of the amount over $518,400
Tax Brackets & Rates – Married Filing Jointly and Surviving Spouses
Taxable Income Between
Tax Due
$0 – $19,750
10%
$19,751 – $80,250
$1,975 plus 12% of the amount over $19,750
$80,251 – $171,050
$9,235 plus 22% of the amount over $80,250
$171,051 – $326,600
$29,211 plus 24% of the amount over $171,050
$326,601 – $414,700
$66,542 plus 32% of the amount over $326,600
$414,701 – $622,050
$94,734 plus 35% of the amount over $414,700
$622,050 and Over
$167,306 plus 37% of the amount over $622,050
Tax Brackets & Rates – Heads of Households
Taxable Income Between
Tax Due
$0 – $14,100
10%
$14,101 – $53,700
$1,410 plus 12% of the amount over $14,100
$53,701 – $85,500
$6,162 plus 22% of the amount over $53,700
$85,501 – $163,300
$13,158 plus 24% of the amount over $85,500
$163,301 – $207,350
$31,829 plus 32% of the amount over $163,300
$207,351 – $518,400
$45,925 plus 35% of the amount over $207,350
$518,400 and Over
$154,792 plus 37% of the amount over $518,400
Tax Brackets & Rates – Separately
Taxable Income Between
Tax Due
$0 – $9,875
10%
$9,876 – $40,125
$988 plus 12% of the amount over $9,875
$40,126 – $85,525
$4,617 plus 22% of the amount over $40,125
$85,526 – $163,300
$14,605 plus 24% of the amount over $85,525
$163,301 – $207,350
$33,271 plus 32% of the amount over $163,300
$207,351 – $311,025
$47,367 plus 35% of the amount over $207,350
$311,025 and Over
$83,653 plus 37% of the amount over $311,025
Trusts and Estates have four brackets in 2020, each with different rates.
Tax Brackets & Rates – Trusts and Estates
Taxable Income Between
Tax Due
$0 – $2,600
10%
$2,601 – $9,450
$260 plus 12% of the amount over $2,600
$9,451 – $12,950
$1,904 plus 35% of the amount over $9,450
$12,950 and Over
$3,129 plus 37% of the amount over $12,950
Standard Deduction Amounts
Amounts for standard deductions see a slight increase from 2019 to 2020 based on indexing for inflation. Note that again as in 2019, there are no personal exemption amounts for 2020.
Standard Deductions
Filing Status
Standard Deduction Amount
Single
$12,400
Married Filing Jointly & Surviving Spouses
$24,800
Married Filing Separately
$12,400
Heads of Household
$18,650
Alternative Minimum Tax (AMT) Exemptions
Like the above, the AMT exemption amounts are increased based on adjustments for inflation, with the 2020 exemption amounts as follows.
Alternative Minimum Tax (AMT) Exemptions
Filing Status
Standard Deduction Amount
Individual
$72,900
Married Filing Jointly & Surviving Spouses
$113,400
Married Filing Separately
$56,700
Trusts and Estates
$25,400
Capital Gains Rates
Capital gains rates remain unchanged for 2020; however, the brackets for the rates are changing. Taxpayers will pay a maximum 15 percent rate unless their taxable income exceeds the 37 percent threshold (see the personal tax brackets and rates above for your individual situation). If a taxpayer hits this threshold, then their capital gains rate increases to 20 percent.
Itemized Deductions
Below are the 2020 details on the major itemized deductions many taxpayers take on Schedule A of their returns.
State and Local Taxes – The SALT deductions also remain unchanged at the federal level with a total limit of $10,000 ($5,000 if you are married filing separately).
Mortgage Deduction for Interest Expenses – The limit on mortgage interest also remains the same with the debt bearing the interest capped at $750k ($375k if you are married filing separately).
Medical Expense Note – The Tax Cuts & Jobs Act set the medical expense threshold at 7.5% of adjusted gross income (AGI) for years 2017 and 2018. The threshold was set to increase to 10% of (AGI) for 2019 and beyond. This Act (TCJA) extends the 7.5% of AGI, through 2020.
Retirement Account Contribution Limits
Finally, we look at the various retirement account contribution limits for 2020.
401(k) – Annual contribution limits increase $500 to $19,500 for 2020
401(k) Catch-Up – Employees age50 or older in these plans can contribute an additional $6,500 (on top of the $19,500 above for a total of $26,000) for 2020. This $500 increase in the catch-up provision is the first increase in the catch-up since 2015.
SEP IRAs and Solo 401(k)s – Self-employed and small business owners, can save an additional $1,000 in their SEP IRA or a solo 401(k) plan, with limits increasing from $56,000 in 2019 to $57,000 in 2020.
The SIMPLE – SIMPLE retirement accounts see a $500 increase in contribution limits, rising from $13,000 in 2019 to $13,500 in 2020.
Individual Retirement Accounts – There are no changes here for IRA contributions in 2020, with the cap at $6,000 for 2020 and the same catch-up contribution limit of $1,000.
Conclusion
There are no dramatic changes in the rates, brackets, deductions or retirement account contribution limits that the vast majority of taxpayers tend to encounter for 2020 versus 2019. Most changes are simply adjustments for inflation. Enjoy the stability – as history has shown, it likely won’t last long.
2020 Tax Brackets, Deductions, Plus More
January 1, 2020 · Blog, Tax and Financial News
⏱ 4 min read
Beginning on Jan. 1, 2020, the Internal Revenue Service (IRS) has new annual inflation adjustments for tax rates, brackets, deductions, and retirement contribution limits. Note, the amounts below do not impact the tax filing you make in 2020 for the tax year 2019. These amounts apply to your 2020 taxes that you will file in 2021.
2020 Tax Rates and 2020 Tax Brackets
Below are the new 2020 tables for personal income tax rates. There are separate tables each for individuals, married filing jointly couples and surviving spouses, heads of household and married filing separate; all with seven tax brackets for 2020.
Tax Brackets & Rates – Individuals
Taxable Income Between
Tax Due
$0 – $9,875
10%
$9,876 – $40,125
$988 plus 12% of the amount over $9,875
$40,126 – $85,525
$4,617 plus 22% of the amount over $40,125
$85,526 – $163,300
$14,605 plus 24% of the amount over $85,525
$163,301 – $207,350
$33,271 plus 32% of the amount over $163,300
$207,351 – $518,400
$47,367 plus 35% of the amount over $207,350
$518,400 and Over
$156,234 plus 37% of the amount over $518,400
Tax Brackets & Rates – Married Filing Jointly and Surviving Spouses
Taxable Income Between
Tax Due
$0 – $19,750
10%
$19,751 – $80,250
$1,975 plus 12% of the amount over $19,750
$80,251 – $171,050
$9,235 plus 22% of the amount over $80,250
$171,051 – $326,600
$29,211 plus 24% of the amount over $171,050
$326,601 – $414,700
$66,542 plus 32% of the amount over $326,600
$414,701 – $622,050
$94,734 plus 35% of the amount over $414,700
$622,050 and Over
$167,306 plus 37% of the amount over $622,050
Tax Brackets & Rates – Heads of Households
Taxable Income Between
Tax Due
$0 – $14,100
10%
$14,101 – $53,700
$1,410 plus 12% of the amount over $14,100
$53,701 – $85,500
$6,162 plus 22% of the amount over $53,700
$85,501 – $163,300
$13,158 plus 24% of the amount over $85,500
$163,301 – $207,350
$31,829 plus 32% of the amount over $163,300
$207,351 – $518,400
$45,925 plus 35% of the amount over $207,350
$518,400 and Over
$154,792 plus 37% of the amount over $518,400
Tax Brackets & Rates – Separately
Taxable Income Between
Tax Due
$0 – $9,875
10%
$9,876 – $40,125
$988 plus 12% of the amount over $9,875
$40,126 – $85,525
$4,617 plus 22% of the amount over $40,125
$85,526 – $163,300
$14,605 plus 24% of the amount over $85,525
$163,301 – $207,350
$33,271 plus 32% of the amount over $163,300
$207,351 – $311,025
$47,367 plus 35% of the amount over $207,350
$311,025 and Over
$83,653 plus 37% of the amount over $311,025
Trusts and Estates have four brackets in 2020, each with different rates.
Tax Brackets & Rates – Trusts and Estates
Taxable Income Between
Tax Due
$0 – $2,600
10%
$2,601 – $9,450
$260 plus 12% of the amount over $2,600
$9,451 – $12,950
$1,904 plus 35% of the amount over $9,450
$12,950 and Over
$3,129 plus 37% of the amount over $12,950
Standard Deduction Amounts
Amounts for standard deductions see a slight increase from 2019 to 2020 based on indexing for inflation. Note that again as in 2019, there are no personal exemption amounts for 2020.
Standard Deductions
Filing Status
Standard Deduction Amount
Single
$12,400
Married Filing Jointly & Surviving Spouses
$24,800
Married Filing Separately
$12,400
Heads of Household
$18,650
Alternative Minimum Tax (AMT) Exemptions
Like the above, the AMT exemption amounts are increased based on adjustments for inflation, with the 2020 exemption amounts as follows.
Alternative Minimum Tax (AMT) Exemptions
Filing Status
Standard Deduction Amount
Individual
$72,900
Married Filing Jointly & Surviving Spouses
$113,400
Married Filing Separately
$56,700
Trusts and Estates
$25,400
Capital Gains Rates
Capital gains rates remain unchanged for 2020; however, the brackets for the rates are changing. Taxpayers will pay a maximum 15 percent rate unless their taxable income exceeds the 37 percent threshold (see the personal tax brackets and rates above for your individual situation). If a taxpayer hits this threshold, then their capital gains rate increases to 20 percent.
Itemized Deductions
Below are the 2020 details on the major itemized deductions many taxpayers take on Schedule A of their returns.
State and Local Taxes – The SALT deductions also remain unchanged at the federal level with a total limit of $10,000 ($5,000 if you are married filing separately).
Mortgage Deduction for Interest Expenses – The limit on mortgage interest also remains the same with the debt bearing the interest capped at $750k ($375k if you are married filing separately).
Medical Expense Note – The Tax Cuts & Jobs Act set the medical expense threshold at 7.5% of adjusted gross income (AGI) for years 2017 and 2018. The threshold was set to increase to 10% of (AGI) for 2019 and beyond. This Act (TCJA) extends the 7.5% of AGI, through 2020.
Retirement Account Contribution Limits
Finally, we look at the various retirement account contribution limits for 2020.
401(k) – Annual contribution limits increase $500 to $19,500 for 2020
401(k) Catch-Up – Employees age50 or older in these plans can contribute an additional $6,500 (on top of the $19,500 above for a total of $26,000) for 2020. This $500 increase in the catch-up provision is the first increase in the catch-up since 2015.
SEP IRAs and Solo 401(k)s – Self-employed and small business owners, can save an additional $1,000 in their SEP IRA or a solo 401(k) plan, with limits increasing from $56,000 in 2019 to $57,000 in 2020.
The SIMPLE – SIMPLE retirement accounts see a $500 increase in contribution limits, rising from $13,000 in 2019 to $13,500 in 2020.
Individual Retirement Accounts – There are no changes here for IRA contributions in 2020, with the cap at $6,000 for 2020 and the same catch-up contribution limit of $1,000.
Conclusion
There are no dramatic changes in the rates, brackets, deductions or retirement account contribution limits that the vast majority of taxpayers tend to encounter for 2020 versus 2019. Most changes are simply adjustments for inflation. Enjoy the stability – as history has shown, it likely won’t last long.
Disclaimer
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
Technology advances continue to reshape industries and businesses – and the accounting industry is no exception. So far, a lot of repetitive tasks are performed with the help of advanced hardware and software. Even for businesses that do not like change, many find themselves making adjustments due to a generation change in the workforce, marketing demands, regulations and client demand. In any case, technology offers strengths once a business adopts new solutions to the accounting processes.
Beginning on Jan. 1, 2020, the Internal Revenue Service (IRS) has new annual inflation adjustments for tax rates, brackets, deductions, and retirement contribution limits. Note, the amounts below do not impact the tax filing you make in 2020 for the tax year 2019. These amounts apply to your 2020 taxes that you will file in 2021.