There are 3 overall changes for the upcoming tax filing season:
- A redesigned, shorter, simplified (but not really) 1040. The new 1040 now looks like a “Post Card.”
IRS cut lines from the old 1040 and moved them to 6 brand new schedules, in the process making the 1040 appear less confusing. I bet some folks will mistakenly assume that if those lines are no longer on the 1040, then those tax issues must not apply anymore. Offloading those lines will create more (not less) confusion. Sweeping dirt under the rug accomplishes nothing, never did.
The 6 new schedules: 1) Additional Income and Adjustment; 2) Tax; 3) Non-Refundable Credits;
4) Other Taxes; 5) Other Payments & Refundable Credits; 6) Foreign Address and Third-Party Designee.
- Changes to the Tax Code overall, see “Highlights – Tax Cuts and Jobs Act”
Read carefully! There are many impactful changes!
Reminder. Wage withholding, for employees, are paycheck deductions and are paid during the tax year – these are advanced payments for anticipated income tax. The withholding tables were revised early 2018 for TCJA, and if you have tax withheld from your paycheck, you likely noticed less taken out of your paychecks for federal taxes.
I hope IRS got the withholding tables right. But because so much changed with TCJA I worry about miscalculations and surprise tax return results.
Please call if you care to come in early and figure how TCJA impacted your 2018 taxes.
- The 20% QBI “Pass Thru” credit is a beast all its own, created to sort of match the reduced flat corporate tax rate. This new credit is for business owners with qualified business income (QBI), and is generally 20% of the taxpayer’s QBI, from either a partnership, S Corporation, sole proprietorship or farm. The QBI credit calculation is subject to many tricky limitations and restrictions. And, SSTB is not a disease.
TCJA is the first rewrite of the tax code in 30 years. Its part reduced tax rates, part renovation, and part rearranging the furniture. It’s all new and a lot to digest. Some pieces make sense; some of it makes no sense. The politics of TCJA are beyond my pay grade but I will say I’ve enjoyed following TCJA implementation. I hope TCJA does good for my clients’ tax returns.
The good news, overall, is that most will pay less income tax. But, simplified income tax? Not so much.
In the end, our tax code is even more complex and complicated, and most folks will surely still prefer leaving preparation to professionals who deal with it, and the IRS, all the time. As always, thank you for your business and for referrals of your friends and family.