Tis Tax Season!
Peter VanderWoude, MS, CPA, CGMA
January 1, 2019
Have you seen the new federal Form 1040? The front and back has been reduced to a half page each, a bit bigger than a postcard. There are an additional six numbered schedules to this year’s Form 1040 to expand on the lines that have been reworked on the personal income tax return. The 1040EZ and 1040A forms are no longer available. Will it be easier to file your income taxes now? Take a look at the new forms and you decide. The Form 1040 instructions are still 117 pages long!
Most people will have a lower tax liability than last year, but refunds may not reflect that with lower tax withholding tables in place. It will take some time getting used to the new tax form and it’s six new schedules, but you should not concern yourself with that. Focus on preparing to file this year. Let’s cover some suggestions.
Do you wonder if you have to gather your charitable donations receipts, unreimbursed medical expenses and other itemized deductions? Probably not, unless you have substantial expenses in those areas. Most people will take the new higher federal standard deduction. If you itemized on your New York tax return last year, you will likely itemize this year. Therefore, prepare your tax document information as you would have done in past years or consult your tax professional.
By the end of January you will receive your W-2s, 1098 (mortgage interest), 1099’s and other tax reporting statements. Place them all in a folder as they arrive in your mailbox. Even if you do not itemize, if you have a home-based business then compile your paid real estate tax bills, utility costs, home repairs, etc. and gather your business records and rental property records. If you are a business owner or own rental property, don’t forget the 1099 reporting requirement. If you paid a contractor $600 or more during 2018 that 1099-MISC needs to be reported to the IRS by January 31. Other 1099’s are reported to the IRS by February 28.
Usually your tax preparer can tell if you are missing tax documents, but if you took an early distribution from an IRA or retirement account, or sold investments, they won’t know because it is a one time thing. You will avoid headaches later if you keep track of these sales and distributions and alert your tax professional. Sometimes these sales or distributions are missed because some people mistakenly think that because taxes were withheld they don’t have to report these transactions.
If you are going to make retirement or HSA contributions, make them prior to April 15 for the 2018 tax year and let your tax preparer know the amount. Also, submit any estimated tax payments you made and dates paid.
No doubt, this tax season is going to be a challenge for taxpayer and tax professional alike. Have a Happy New Year!