The purpose of Money Talk is to improve readers' financial capability with research-based personal finance information.
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:
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.
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
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.