IRS Commissioner Announces 2019 Tax Filing Season to Kickoff Monday, January 28
By Rafique S.M. Ahmed
The Internal Revenue Service has confirmed that it will start processing tax returns beginning Monday, January 28, 2019 and provide refunds to taxpayers as scheduled regardless of the government shutdown.
"We are committed to ensuring that taxpayers receive their refunds notwithstanding the government shutdown. I appreciate the hard work of the employees and their commitment to the taxpayers during this period. IRS employees have been hard at work over the past year to implement the biggest tax law changes the nation has seen in more than 30 years," said IRS Commissioner Chuck Rettig.
The final deadline to file 2018 tax returns is Monday, April 15, 2019 for most taxpayers. However, because of the Patriots' Day holiday on April 15 in Maine and Massachusetts and the Emancipation Day holiday on April 16 in the District of Columbia, taxpayers who live in Maine or Massachusetts have until April 17, 2019 to file their returns. The IRS is strongly encouraging taxpayers to file their tax returns electronically not only to minimize errors, but also to receive refunds much faster.
The Federal Tax Cuts and Jobs Act was signed into law in December, 2017 and enacted in 2018 making the upcoming tax season as one of the busiest and most complicated tax season involving quite a few sweeping and major changes to the US tax system in more than 30 years. The Tax Cuts and Jobs Act basically is a 'Trump Special' designed mainly to benefit the rich Americans. He together with his family members and other rich American taxpayers will be laughing all the way to their banks since the new Tax Law not only reduces the income tax rate for corporations from 35% to 21%, provides a large new tax reduction for owners of pass-through entities, and also significantly increases individual alternative minimum tax (AMT) exemption and estate tax exemptions. The lower and middle-class Americans also benefit from the increased amounts of Standard Deduction and Child Tax Credit but are at the same time adversely affected by the loss of Personal Exemptions and Caps on various deductions. The new TCJA Law also eliminates or limits many tax breaks, and much of the tax relief is only temporary.
The law has also introduced Qualified Business Income (QBI) Deductions under Code Section 199A under which a non-corporate taxpayer, including a trust or estate having qualified business income from any trade or business, including income from a pass-through entity, might be allowed to deduct up to 20% of that income from the taxable income on Form 1040.
The following are other significant changes in the new tax landscape of 2018 which will definitely have a profound impact on your tax returns:
* Forms 1040A and 1040-EZ have been abolished by the IRS and are no longer available.
* IRS has introduced a newly designed Form 1040 supplemented with new Schedules 1 through 6 to be used as needed to complete more complex tax returns.
* Effective January 1, 2018 through December 31, 2025, seven tax brackets will apply for individuals namely, 10%, 12%, 22%, 24%, 32%, 35% and 37%. The law also provides four tax brackets for estates and trusts namely 10%, 24%, 35% and 37%.
* Deduction for Personal Exemption of $4,050 for each taxpayer and their dependents has been suspended by reducing the exemption amount to zero. As a result, many taxpayers will no longer be itemizing deductions. No changes are made to the additional standard deduction for the elderly and blind.
* Standard deduction has increased to $24,000 for Married Filing Jointly, $18,000 for Head of Household, and $12,000 for taxpayers filing as Single or as Married Filing Separately.
* The deduction of state and local taxes, sales taxes and property taxes is limited to a combined, total deduction of $10,000 ($5,000 if the filing status is Married Filing Separately).The $10,000 maximum property tax deduction does not affect rental property reported on Schedule E.
* Job-related expenses or other miscellaneous itemized deductions including uniforms, tools, union dues, mileage for work purposes, brokerage and IRA fees and employee business expenses that were subject to the 2%-of-adjusted-gross-income floor can no longer be deducted.
* Medical and dental expenses exceeding 7.5% of Adjusted Gross Income are deductible regardless of taxpayer's age.
* Child Tax Credit increased to $2,000 for taxable years 2018 through 2025 and up to $1,400 is refundable to lower income filers. The new law also added a new $500 credit for each dependent that is not a qualifying child. These dependents include elderly parents and disabled adult child. This credit is nonrefundable and phases out exceeding threshold amounts. Credits are allowed to qualified children who are US citizens having social security numbers.
* Alimony paid for divorce decrees entered after 2018 will not be deductible by the payer. Alimony received will also not be taxable for the recipient.
* Moving expenses have been eliminated except for the Armed Forces of the United States on active duty who move due to a military order requiring a permanent change of station. The new law also makes employer provided moving reimbursements taxable.
* Casualty and theft losses resulted from fires, earthquakes, floods or similar natural disaster could only be claimed if they were a result of a federally declared disaster.
* The deduction for tax preparation fees has been suspended through 2025.
* Home mortgage interest on taxpayer's primary residence or second home property incurred after December 14, 2017 will be capped at $750,000 instead of $1,000,000.
* Interest on home equity loans is only deductible in 2018 on loans to maintain or improve your home. Interest on equity loans for purchasing a personal car, vacation, paying off credit cards, etc. are not deductible.
* Gifts to tax-exempt charities are still deductible in 2018. However, taxpayer's contribution basis is increased to a maximum of 60%.
* The unearned income of children under 18 will be taxed at the ordinary income and capital gains rates of estates and trusts and not at their parents' marginal tax rate.
* Some business assets placed in service after September 27, 2017 will qualify for 100% bonus depreciation in 2018. The assets cannot have a life of more than 20 years to qualify for 100% bonus depreciation.
* New SUVs weighing over 6,000 pounds and placed in service in 2018 may be expensed 100% of the cost. Used SUVs also qualify for special depreciation. Only the business use of the property may be expensed.
* When 100% first year bonus depreciation is not available, up to $1,000,000 of the cost of recovery property may be expensed in 2018 under Section 179 Expense.
* The Alternative Minimum Tax for "C" corporations has been eliminated.
* The annual gift exclusion for 2018 is increased to $15,000. The top tax rate on gifts is 40% in 2018.
* The Tax Cut and Jobs Act will not include in income student loans discharged due to death or total and permanent disability of the student after December 31, 2017 and before January 1, 2026.
* The exclusion of bicycle commuting reimbursement from wages has been eliminated.
* Final returns of decedents eliminate the personal exemption to zero for tax years from 2018 through 2025.
* Student loan interest up to $2,500 can be deducted per year. The deduction begins to phase out for borrowers with an adjusted gross income over $65,000 and caps at $80,000.
* Foreign earned income maximum exclusion for 2018 increased to $104,100.
* Social Security Tax will be computed at 6.2% up to a maximum wage limit of $128,400.
* Standard mileage rate for business use of vehicle increased in 2018 to $.545 per mile. The rate for medical care and moving(Navy) also increased to $.18 per mile. Mileage rate for charitable causes is $.14.
(Rafique S.M. Ahmed is a professional Tax Accountant and has been providing accounting and tax services in California for more than thirty-five years. He is also an Authorized IRS Electronic Filing Provider. His office, Automated Tax & Financial Services is located at 1109 Via Verde, San Dimas, California 91773. Rafique Ahmed can be reached at (909)599-1412 or (909)599-1414.)
