Thursday, April 11, 2019

2018 Tax Season Reflections

We are down to the wire on 2018 tax season with less than a week to file returns (or filing extensions) and make tax payments. Having prepared by own return in early March, I am sharing some tips and insights for folks who are still in the home stretch:


¨      Complex Returns Are Still Complex- If you filed a 1040 form before 2018, you likely had to file one or more of six new tax schedules numbered Schedule 1 to Schedule 6. I filed three of these forms. The IRS simply took some of the lines from the previous 1040 “long form” and transferred them to a new location. The new 1040 half-sheet format looks simple and “postcard-like” but looks can be deceiving.


¨      Something Old, Something New- In addition to the new schedules 1-6, many familiar schedules from past tax years remain. I skipped Schedule A this year because I no longer benefit from itemizing deductions but I still filed schedules B, C-EZ, D, and SE. A new calculation this year was the qualified business income deduction available to self-employed business owners and freelancers.


¨      Know Your State Tax Rules- Even if you can no longer deduct items on a federal income tax return, you may be able to on state income taxes. For example, I deducted 2018 property tax payments and medical expenses in excess of 2% of adjusted gross income (AGI) on my New Jersey income tax return.


¨      New Tax Forms Have a Learning Curve- I do my own taxes and preparing my return took about the same time this year as before. I no longer had to calculate employee business expenses and other itemized deductions. That saved some time. This time savings was reallocated to learning the format of the new schedules. However, I now have a good template to use until the Tax Cuts and Jobs Act expires in 2025.


According to a popular saying, there are only two certainties in life: death and taxes. I would also add a third certainty: periodic tax law changes. Here’s hoping that your 2018 income tax season is not too stressful. Use it as a “teachable moment” and adjust your tax withholding or quarterly estimated payments if you paid too much or too little to the IRS.

No comments:

Post a Comment

The Power of Positive Habits

I recently attended an online class about the power of habits sponsored by Next Gen Personal Finance. In that class, I heard this statement:...