When you do your 2018 Federal tax return, most of you are in for a big surprise. Compare your 2017 and your 2018 tax returns – they barely resemble each other. The new tax form has been heralded as “the postcard tax return” – which, if you stretch your imagination, is true, but only for the simplest of tax returns.
Has the IRS released a new tax return that can fit on a postcard? Yes –kind of. But don’t start celebrating yet and certainly don’t fire your CPA just yet. All they’ve really done is taken the information that used to fit on two pages and created a two page tax return (actually two half pages) and then dumped the rest of it into potentially six additional pages of Schedules. Did you receive alimony, unemployment, have capital gains, make an IRA contribution, or pay student loan interest? You’ll have to file Schedule 1. Subject to the AMT? Schedule 2 is waiting for you. Have day care expenses or entitled to an Education credit for college costs? Schedule 3. Need to pay self-employment tax? Please fill out Schedule 4. There are also Schedules 5 and 6 and we’ve retained Schedules A, B, C, D, E, F etc. But hey, “it’s a postcard”.
For most people, two pages has become up to eight pages – six of which are poorly thought out. From a good standpoint, they have attempted to keep the same line numbers from the two page tax return we had filed for the last couple of decades.
And is there anybody else not all that excited by the idea that the mailman delivering this “postcard” to the IRS and all the people handling that tax return could theoretically read it and have access to your social security number, income numbers, etc??
So, to be clear, tax simplification is a myth. “Tax Simplification” only exists for those people with the very simplest of tax returns. It’s a fabrication by our politicians to justify the new tax law and make people think they are looking out for you.
So, while the whole idea of tax simplification is a myth, not everything in the new tax law is bad. In fact, a lot of it is quite good. Yes, in high tax states like New York, New Jersey and California, you will lose a good portion of your state and local tax deduction. Which, on its face, is distressing. But, you will also face higher phase out rates for the AMT, lower thresholds for deducting medical expenses, and generally lower tax rates. And then, there is the granddaddy of them all. The section 199(a) deduction also known as Qualified Business Income (QBI). This is a windfall to many business owners. While the calculation itself can be a bear, many business owners will see significant decreases in their taxes because of this new law.
In closing, we encourage you to get your information in to your tax preparer as soon as possible. This year, more than any other year, it’s important to be organized, and as early as possible. Help us help you to maximize the savings under the new tax law.
Our tag line is “Not All CPA’s are Alike”. Most CPA firms concentrate simply on the preparation of your tax return. Very little, if any, thought goes into how else can they help you or how can they reduce your tax liability. There rarely is any thought on forward thinking tax planning. We invite you to find out what “Not All CPA’s are Alike” really means and what a forward thinking CPA firm can mean to you. Please feel free to call us at (973) 276-0833 to schedule your free consultation!!