General Tax Tips
New State Tax Filing Rules Under TCJA – Did You Know?
Historically, many states have closely modeled their income tax regulations after federal laws, allowing taxpayers to complete state returns very quickly after filing their federal forms. However, some states have not yet updated their forms and rules to comply with the sweeping federal tax code changes introduced under the 2017 Tax Cuts and Jobs Act (TCJA). As a result, in addition to any impact it has on your federal taxes, the TCJA might significantly affect procedures for filing your 2018 state tax return.
You may need to provide additional information and documentation not required for your federal returns. You may also be able to claim deductions at the state level that are no longer allowed on IRS forms, or find that certain deductions created under the TCJA cannot be claimed on your state return.
Increased Standard Deduction for Seniors – Did You Know?
If you were born before January 2, 1954, you may qualify to increase the standard deduction on your 2018 federal tax returns by as much as $1,600 (or $2,600 for joint filers). Because your standard deduction reduces your taxable income, a larger deduction means a lower tax bill.
Your eligibility for the increased standard deduction depends on your age, your spouse’s age, your filing status, your citizenship/residency status, and other factors. A tax professional can help you determine whether you qualify, and show you how to claim the full deduction you are allowed.
New Tax Bill Standard Deductions – Did You Know?
For those that opt to take the standard deduction on their taxes rather than itemized deductions, the Tax Cuts and Jobs Act (TCJA) increases the amount you can deduct until 2025, when the provision is set to expire.
The amount goes from $6,350 to $12,000 for single filers and from $12,700 to $24,000 for those filing jointly.
Taxpayer Bill of Rights – Did You Know?
As a taxpayer, you have a set of ten fundamental rights that the IRS is obligated to protect.
They are:
1. The Right to be Informed.
2. The Right to Quality Service.
3. The Right to Pay No More Than the Correct Amount of Tax.
4. The Right to Challenge the IRS’s Position and Be Heard.
5. The Right to Appeal an IRS Decision in an Independent Forum.
6. The Right to Finality.
7. The Right to Privacy.
8. The Right to Confidentiality.
9. The Right to Retain Representation.
10. The Right to a Fair and Just Tax System.
More information can be found in IRS Publication 1: Your Rights as a Taxpayer, available here: https://www.irs.gov/pub/irs-pdf/p1.pdf.
Reduce Fees & Penalties – Did You Know?
You should still file your taxes, even if you can’t pay.
In most cases, the failure-to-file penalty can be 10 times more than the failure-to-pay penalty. So if you can’t pay in full, you should file your tax return and pay as much as you can.
Ordinary vs. Qualified Dividends – Did You Know?
If you own stock, your dividend income may be classified as “Qualified Dividends” on the Form 1099-DIV you receive from the company. While ordinary dividends are taxed at your usual income tax rate, qualified dividends are taxed at the long-term capital gains tax rate, which is significantly lower in most cases. In fact, for lower-income taxpayers, the 2018 tax rate on qualified dividend income is 0%.
Historically, the tax rate on your qualified dividend income was directly linked to (but usually less than) your income tax rate. However, the 2017 Tax Cuts and Jobs Act (TCJA) created designated income brackets for the three qualified dividends tax rates (0%, 15%, and 20%). These brackets are independent of ordinary income tax brackets and will be adjusted for inflation annually. Therefore, the tax rate on your qualified dividends could change even if your income tax rate does not, or vice versa
Protecting Against Tax Fraud – Did You Know?
The IRS will never:
– Call to demand immediate payment using a specific payment method such as a prepaid debit card, gift card, or wire transfer
– Demand that you pay the taxes without the opportunity to question or appeal the amount owed
– Threaten to bring in local police, immigration officers or other law enforcement officers
If an IRS agent shows up, they will always provide two forms of official credentials: a pocket commission and a government identification card.
The IRS may also assign certain cases to private debt collectors, but only after giving you written notice. Any payment to the private debt collectors should be made payable to the U.S Treasury.
ABLE Accounts – Did You Know?
Under the Tax Cuts and Job Act (TCJA), starting in 2018, the annual contribution limit for Achieving a Better Life Experience (ABLE) accounts has been increased from $14,000 to $15,000.
You may also be able to claim the Saver’s Credit for a percentage of your contribution to an ABLE account if you’re the designated beneficiary.
The TCJA also allows eligible individuals with disabilities to put more money into their ABLE accounts, and roll in money from their 529 plan to their own or a family’s ABLE account. The additional amount may be up to the lesser of the two amounts:
– The designated beneficiary’s compensation for the tax year
– The poverty line for a one-person household. For 2018, this amount is $12,140 in the continental U.S., $13,960 in Hawaii, and $15,180 in Alaska.
Waived Penalty – Did You Know?
In order to help taxpayers with the changes under the Tax Cuts and Jobs Act (TCJA), the IRS has announced that it is waiving the estimated tax penalty for many taxpayers who fell short of their taxes owed through income tax withholding and estimated tax payments for the 2018 tax year.
They are generally waiving the penalty for any taxpayers who paid at least 85% of their total tax liability, where the usual percentage threshold is 90% to avoid a penalty.
Child Tax Credit – Did You Know?
Under the Tax Cuts and Job Act (TCJA) for 2018, a qualifying child must have a Social Security Number in order to claim the Child Tax Credit.
To be a qualifying child, they must be a citizen, national, or resident of the United States and must not have attained 17 years of age by the end of the tax year.