The Foreign Service Journal, January-February 2020

66 JANUARY-FEBRUARY 2020 | THE FOREIGN SERVICE JOURNAL AFSA NEWS Schedule 2: Additional taxes, including those formerly on 2018 Schedule 4 (now obsolete), e.g., the alternative minimum tax (AMT), self-employment tax, household employment taxes. Schedule 3: Nonrefundable credits and payments formerly on 2018 Schedules 3 and 5 (also obsolete), e.g., foreign tax credit, credit for child and dependent care, estimated tax pay- ments, amount paid with a request for an extension. To reiterate, 2018 Schedules 4, 5 and 6 are no longer valid for 2019. The lettered schedules, commonly A through E, remain. (A) Itemized deductions, e.g., medical and dental expenses, deductible taxes and interest paid, gifts to charity, casualty losses and others. (B) Interest, dividends and foreign trusts and accounts. (C) Profit or loss from business. (D) Capital gains and losses, e.g., stock, personal use realty, virtual currency. (E) Supplemental income and loss, e.g., rental property, sole proprietorship, LLC and S Corp income. Many other lettered schedules and incentive-specific forms (e.g., 8283 gifts to charity or 8889 health care savings accounts) and corresponding worksheets may be necessary. All are available from the IRS, most with corresponding product pages and instructions. In summary, most of the calculations and legal categories for income have not changed despite the administrative rearrange- ment of this year’s 1040. AFSA recommends that members review the IRS’s 1040 information webpage “About Form 1040, U.S. Individual Income Tax Return,” the 1040 Instructions, Pub- lication 17 and this year’s IRS Nationwide Income Tax Forums Online. New W-4 Withholding Certificate Has No Exemptions Beginning in 2020 Taxpayers usually do not think to revise their W-4 withhold- ings until April, after they’ve paid their final 2019 taxes and withheld taxes on their wages based on an old calculation for several months of 2020. Don’t wait. Withholding for next year begins Jan. 1, so readers who have not already resubmitted are withholding their taxes filed in April based on an old W-4. AFSA recommends readers revise their W-4s (with the new form) via their Human Resources office or through their employer’s online portal (e.g. Employee Express for State Department employees). Promptly doing so will help you avoid overwithholding or playing catch-up due to underwith- olding for several months. Standard Deduction The standard deduction has gone up slightly this year: • $24,400 married filing jointly, • $18,350 for heads of household, specifically defined by IRC Section 2(b), and • $12,200 for individuals filing separately. The personal exemption remains $0 for 2019. Capital Gains for Sale of Capital Assets Such as Realty, Stocks or Virtual Currency Short-term capital gains are taxed at the same rate as ordi- nary income. With a couple of exceptions, long-term capital gains rates vary based on taxable gross income—from 0 percent for those in the lowest tax bracket to 20 percent for those in the highest. Finally, and closely related, an additional 3.8 percent net investment income tax may apply to some forms of invest- ment income, including some capital gains for taxpayers with modified adjusted gross income above: • $250,000 for those married filing jointly, • $200,000 head of household, • $125,000 unmarried, and • $250,000 qualifying widow with a dependent child.