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IRS Releases 2020 Inflation-Adjusted Payroll Amounts

Nov. 6, 2019, 8:27 PM

Numerous 2020 adjustments to tax-related amounts, including transportation fringe benefits, were released Nov. 6 by the Internal Revenue Service.

The monthly limit for the qualified transportation fringe benefit and for qualified parking is to increase to $270 from $265, the IRS said in Revenue Procedure 2019-44 and a news release (IR-2019-180). Other tax benefits are to increase in 2020 because they are being adjusted for inflation.

The IRS annually publishes inflation adjustments for about 60 tax provisions. Payroll-related provisions that are to be applied in 2020 include:

  • The exempt amount of wages, salary, or other income to apply to tax levies for years when the personal exemption amount is zero is $4,300, up from $4,200 in 2019.
  • The foreign earned income exclusion is to increase to $107,600 from $105,900.
  • The adoption tax credit is to increase to $14,300 from $14,080.
  • The health flexible-spending arrangement limit is to increase to $2,750 from $2,700.
  • Medical savings-account adjustments pertaining to a high-deductible health plan (HDHP), with an HDHP defined for self-only coverage as a plan with an annual deductible of $2,350 to $3,550, compared with $2,350 to $3,500 in 2019, and out-of-pocket expenses not exceeding $4,750, up from $4,650; and an HDHP defined for family coverage as a plan with an annual deductible of $4,750 to $7,100, compared with $4,650 to $7,000 for 2019, and out-of-pocket expenses not exceeding $8,650, up from $8,550.

  • The Earned Income Credit is $6,660 for qualifying taxpayers who have at least three qualifying children, up from $6,557.

  • The standard deduction for married filing jointly is to increase to $24,800 from $24,400; for single taxpayers and married individuals filing separately to $12,400 from $12,200, and for heads of households to $18,650 from $18,350.
  • Some penalty amounts for failing to file tax returns and deposit taxes. The general-rule penalty is $280 for each incorrect form, with an annual maximum of $3,392,000. If the form is corrected within 30 days, the penalty is $50 for each return, with a maximum of $565,000 for the year. If the form is corrected after 30 days but by Aug. 1, the penalty is $110 for each form, with an annual maximum of $1,696,000. The maximum penalties are lower for employers with three-year average gross receipts of up to $5 million.
  • The personal exemption is to be zero, unchanged from 2019, because personal exemptions were eliminated until Jan. 1, 2026, under the tax code overhaul (Pub. L. 115-97) that took effect Jan. 1, 2018.

To contact the reporter on this story: Michael Trimarchi in Washington at mtrimarchi@bloombergtax.com
To contact the editor on this story: Howard Perlman at hperlman@bloombergtax.com