2018 Tax Return

[disneysteve]

mentioned this before, but talked to a tax professional. the advice was to wait until the tax law and irs opinions are all finalized.

quick example is if you pay college tuition. If you file now, you will get zero deduction or tax credit for it, even though lawmakers are likely to retroactively enact the deduction/credit.

That would work if we did them ourselves but we use an accountant. He encourages all clients to sign up early so that they don't get swamped with last minute filers. In fact, he offered a discount on fees for signing up early. I guess if we need to file an amendment later, we will.

[Fishindude77]

The tax changes increased the bottom line on a business I am involved with $250,000 to the better. We gave some to stock holders, gave some employee raises and did some charity work in the community with most of it.

[creditcardfree]

mentioned this before, but talked to a tax professional. the advice was to wait until the tax law and irs opinions are all finalized.

quick example is if you pay college tuition. If you file now, you will get zero deduction or tax credit for it, even though lawmakers are likely to retroactively enact the deduction/credit.

What deduction tax credit are you referring to? I'm using software that is allowing both American Opportunity Tax Credit and Lifetime Learning credits. I have not yet filed, but I don't see anywhere that this no longer available. Unless you are referring to interest loan deduction?! (We have zero college loans so this doesn't affect us).

[riverwed070707]

My taxable income increased $20k in 2018, primarily because in 2017 I claimed a loss on my rental property due to significant renovations whereas this year it made $35k. Effective tax rate went down from 14% to 11%. Tax owed increased $600 (not bad considering the income difference). Credits increased $2,600 largely because I only get to claim my daughter in even years so its not totally an apples to apples comparison. Biggest disappointment for me was my state tax increasing from $3,100 to $5,533 and getting hit with an underpayment penalty. Didn't see that coming.

[~bs]

What deduction tax credit are you referring to? I'm using software that is allowing both American Opportunity Tax Credit and Lifetime Learning credits. I have not yet filed, but I don't see anywhere that this no longer available. Unless you are referring to interest loan deduction?! (We have zero college loans so this doesn't affect us).

Those are the credits. The way much of tax law works is that lawmakers have up to Januaryish to finalize tax law for the previous year, that is when credits such as those are signed into law. But because of the shutdown, the lawmakers and IRS are all swamped and backlogged so wasnt able to. The tax prep software wont reflect those changes until signed into law. The problem is that as time passes, it lessens the chance that congress will try to write it into law because it'll be seen as "too late". So probably you should do as disney said, and just file, then do an amended return if you have to.

Assuming they write it into law, you'd need to wait for the IRS to issue revised tax forms AND the tax software programs to incorporate them with all the tax changes. All that will take time, so probably looking at late March, I would guess. If you're in this situation, I think filing now, then amending the return before the 4/15 filing period is over is silly, but that's just my 0.02.
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Edit: I guess the official term is "tax extenders". This is an article from a few days ago.

As if tensions weren't running high enough in Washington, Congress has another battle on its hands: renewing a package of breaks for the 2018 tax year.

Say hello to the "tax extenders," a series of temporary provisions in the code that have expired and must be reauthorized by elected officials retroactively each year in order for taxpayers to use them.

These extenders run the gamut: Previously, they have included write-offs on racehorses and motorsports complexes
................
Kaeding expects Congress to address the extenders in an upcoming government funding bill.
Taxpayers could be in for a headache if Congress doesn't renew the tax breaks.
.................
Here are three big extenders that are still undecided for 2018. Mortgage insurance
Debt forgiveness on foreclosure
Tuition and fees for higher education

https://www.cnbc.com/2019/02/06/cong...-for-2018.html

[~bs]

That would work if we did them ourselves but we use an accountant. He encourages all clients to sign up early so that they don't get swamped with last minute filers. In fact, he offered a discount on fees for signing up early. I guess if we need to file an amendment later, we will.

you can sign up early, and he can prep 99% of your return, but you can just tell him to hold off filing it until they resolve the extenders unless he's willing to amend your return for free or something, which is doubtful. And this possibly affects more than just education credit people. If you live in high cost of living area, the combination of mortgage interest deduction (if extended) + state income tax might put you in the itemized deduction category. For one of the other posters that donated $25000, they will likely be affected by this.

[msomnipotent]

I was just about to start ours and then our husband was that there was a mistake and to wait for a corrected W2. Of course he didn't ask what the mistake was, or when to expect the new W2. I admit that I am a little apprehensive after reading an article about how shocked people were about having to pay taxes this year when they used to get refunds. One example was a woman that usually received a $10,000 refund every year and now has to pay $10,000 this year. First, why would you have your withholdings set to get that much back as a refund every year, and second, how can you not notice a change in your paycheck that would cause a $20,000 change in taxes? Are the changes really that drastic or are people just being nuts?

[~bs]

I was just about to start ours and then our husband was that there was a mistake and to wait for a corrected W2. Of course he didn't ask what the mistake was, or when to expect the new W2. I admit that I am a little apprehensive after reading an article about how shocked people were about having to pay taxes this year when they used to get refunds. One example was a woman that usually received a $10,000 refund every year and now has to pay $10,000 this year. First, why would you have your withholdings set to get that much back as a refund every year, and second, how can you not notice a change in your paycheck that would cause a $20,000 change in taxes? Are the changes really that drastic or are people just being nuts?

From my understanding, the feds changed the withholding tables. I dont know off the top of my head if they were too aggressive with it. But essentially the taxes people owe are probably around the same or less. Its just that the amounts withheld through the year aren't enough to cover the withholding. To actually swing from 10k refund to 10k payment, the person must now be severely underwithheld. there's way more to the story that's not being disclosed.

[msomnipotent]

From my understanding, the feds changed the withholding tables. I dont know off the top of my head if they were too aggressive with it. But essentially the taxes people owe are probably around the same or less. Its just that the amounts withheld through the year aren't enough to cover the withholding. To actually swing from 10k refund to 10k payment, the person must now be severely underwithheld. there's way more to the story that's not being disclosed.

I would hope that there was more to the story, but they didn't really go into it. Honestly, I wound up throwing the paper in the recycling bin halfway through the article. I read 3 sections of the Trib and all 3 had at least one article of at least one person blaming everyone but themselves for their problems and I just couldn't take it anymore. I was just concerned with this because I started to think, "Well, we did have a little more in our checks, and we can't claim all of our property taxes now, and we are not itemizing this year, so maybe...."

[~bs]

^also keep in mind that the media nowadays loves to blow things out of proportion to generate hits. It is my guess that the actual impact to the average middle class worker is minimal if you compared actual tax liability last year to this year.

You can't claim your property tax and probably wont itemized, but the standard deduction basically doubled. So if you look at your itemized deductions from last year, and the amount is less than the new standard deduction for this year ($24000 for married), then you dont have anything to worry about. $24000 is a really high threshold to overcome if youre trying to itemize.

[creditcardfree]

Those are the credits. The way much of tax law works is that lawmakers have up to Januaryish to finalize tax law for the previous year, that is when credits such as those are signed into law. But because of the shutdown, the lawmakers and IRS are all swamped and backlogged so wasnt able to. The tax prep software wont reflect those changes until signed into law. The problem is that as time passes, it lessens the chance that congress will try to write it into law because it'll be seen as "too late". So probably you should do as disney said, and just file, then do an amended return if you have to.

Assuming they write it into law, you'd need to wait for the IRS to issue revised tax forms AND the tax software programs to incorporate them with all the tax changes. All that will take time, so probably looking at late March, I would guess. If you're in this situation, I think filing now, then amending the return before the 4/15 filing period is over is silly, but that's just my 0.02.
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Edit: I guess the official term is "tax extenders". This is an article from a few days ago.
https://www.cnbc.com/2019/02/06/cong...-for-2018.html

Thanks for some reason I didn't know that these education credits had to be 'reauthorized' each year!
I will probably wait even though the credits may cause us to get a refund. If they aren't extended then we would owe that money back AND have to file an amendment.

[Singuy]

^also keep in mind that the media nowadays loves to blow things out of proportion to generate hits. It is my guess that the actual impact to the average middle class worker is minimal if you compared actual tax liability last year to this year.

You can't claim your property tax and probably wont itemized, but the standard deduction basically doubled. So if you look at your itemized deductions from last year, and the amount is less than the new standard deduction for this year ($24000 for married), then you dont have anything to worry about. $24000 is a really high threshold to overcome if youre trying to itemize.

As I explained in my first post, the part that really affect Americans is the repeal of personal exemptions which used to be additive to itemized deduction.

[Thrif-t]

I thought I had read somewhere that people who had taken these credits on their return were going to have to wait to get their refunds to see if the credits got extended?

I just checked my online bank and I got my refund yesterday and got the AOTC for one kid and the LLC for the other, so they are issuing refunds. I can't see them not extending the credits, then trying to recollect all the refunds they paid out.

[~bs]

As I explained in my first post, the part that really affect Americans is the repeal of personal exemptions which used to be additive to itemized deduction.

I think it generally shouldn't matter for most because the standard deduction is way way higher now. But might negatively affect certain people in some situation.

And if people were counting on the personal exemptions of dependents, there is now tax credits to replace them, so it's likely a wash of some sort.

[~bs]

I thought I had read somewhere that people who had taken these credits on their return were going to have to wait to get their refunds to see if the credits got extended?

I just checked my online bank and I got my refund yesterday and got the AOTC for one kid and the LLC for the other, so they are issuing refunds. I can't see them not extending the credits, then trying to recollect all the refunds they paid out.

I think the tax form and lines might have been eliminated from the 1040, so if someone claimed it, they had to work some magic to do so because none of the tax softwares or tax preparers should have allowed it.

This years already a cluster***** There are going to be a lot of early filers that will miss the changes and not amend. Just look at how many people on this site (who are already financially minded) that had no clue what I was talking about. The general public is much more ignorant.