Time to Review 2019: What to Expect
NEW for calendar year 2019, the dollar amount of the penalty for not maintaining minimum essential health coverage is $0. The Tax Cuts and Job Act eliminated the penalty which was at least $695 per adult for 2018 and could have been much higher based upon family members and household income.
While alimony that was required, before 2019, was deductible by the payor and taxable to the payee, the rules have changed for 2019. The new law repeals the deduction, and inclusion in taxable income, for alimony paid/received under an agreement executed after 2018. Modifying existing agreements (pre 2019) remain deductible/taxable unless they expressly state that the new rules apply.
The items for tax year 2019 of greatest interest to most taxpayers include the following dollar amounts:
The standard deduction for married filing jointly rises to $24,400 for tax year 2019, up $400 from 2018. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,200 for 2019, up $200, and for heads of households, the standard deduction will be $18,350 for tax year 2019, up $350.
The personal exemption for tax year 2019 remains at $0, as it was for 2018. This elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act
Annual Gift Limits
The annual exclusion for gifts is $15,000 for calendar year 2019, remains the same as it was for calendar year 2018.
Medical & Dental Expenses
Taxpayers can still deduct the part of their medical and dental expenses that exceeds 10 percent of their adjusted gross income in 2019 up from 7.5 in 2018.
State & Local Taxes
The current law limits the deduction of state and local income, sales, and property taxes to a combined total deduction of $10,000. The amount is $5,000 for married taxpayers filing separate returns. Taxpayers cannot deduct any state and local taxes paid above this amount.
The current law suspended the deduction for job-related expenses or other miscellaneous itemized deductions that exceed 2 percent of adjusted gross income. This includes unreimbursed employee business expenses, uniforms, union dues and the deduction for business-related meals and travel.
Home Mortgage Interest
Beginning in tax year 2018, taxpayers can deduct the interest on up to $750,000 of qualified home loans ($375,000 for Married Filing Separate). The new amount decreased from $1 million under 2017 rules. But if you secured your home loan before Dec. 15, 2017, the $1 million limit still applies to your deduction.
The Tuition and Fees Deduction
This deduction, which expired at the end of 2017, was available for up to $4,000 for qualifying educational expenses like tuition and required fees and materials. However, many people who pay educational expenses can still use tax credits like the American Opportunity Credit or Lifetime Learning Credit
Frequently Missed Info!
Take extra time to make sure that you have all the necessary facts if any of the following situations applies to you.
- Child Care Expenses. I need the full name, address, telephone number, tax ID number of your care providers and the total paid per child.
- Estimated Federal Tax Payments. . Find the date and amount for payments. April 15, 2019, June 15,2019, September 15, 2019 and January 15, 2020. A Federal January 2018 payment would have been claimed on your 2017 return.
- Sales of Property. The most important thing is the Final Settlement Statement. Include a list of home improvements in all prior years since purchase.
- College Tuition. Form 1098- T lists tuition paid. These forms are mailed to the student. Make sure that the "student" watches for these forms and gives them to you. I need these forms as well as details on the courses, all education-related expenses, when each item was paid and who the "student" was.
- Sales of Stock. Form 1099- B shows sale price. If this form does not show the original purchase information you will.need.to provide this.
- New Tax Rules On Pass- Through Entities. Schedule K-l from partnerships and S-Corps always seem to arrive late. Don't worry. We can do the rest of your return and be ready to finish when the elusive K-l arrives.
- Social Security Benefits. Look for Form 1099-SSA. We must report the gross amount and not just your net monthly benefit. Your Medicare Premiums listed on the Form may also get you a medical deduction.
- Employees - Last Pay Stub. Your W - 2 is critical, but your last pay stub may reveal tax deductions that don't usually show up anywhere else.
- Special Accounts. Do you contribute to an IRA, Roth_IRA or Health Savings Account? These and others can affect your taxes. Make sure I have all 1099s and information on contribution amounts and dates.
- Complex Transactions. Please call if you have a foreclosure, sale or exchange of real estate, casualties such as theft or natural disaster.
January's "Important Tax Information Enclosed" Is Coming. Let's Be Prepared!
Most of the needed tax records to prepare your tax return will show up in the mail or online in January 2020. Collecting all your tax related documents is important so that we report a complete and accurate return.
The IRS also gets copies of many of these documents and will match your tax return to their records.
Let's review what you should be looking for ...
W-2s. Read them carefully. Contact your employer if there is a discrepancy or if you don't receive them by the end of January.
1099s. You should receive 1099-INT or 1099-DIV forms for any accounts that pay interest or dividends. Even tax-exempt interest must be reported. IMPORTANT: "Corrected" forms are always a possibility. Be alert for such announcements.
1095-A, 1095-B & 1095-C. You will receive a l095-A if you purchased Health Care through the Health Insurance Marketplace and had part of your premiums offset by the Advance Payments of Premium Tax Credit. You will receive a 1095-B or 1 095-C for health insurance purchased or provided by your employer on company sponsored insurance plans.
Other 1099s. Real estate sales are often reported on 1099-S. Stock sales on l099-B or Consolidated 1099. Pension, 401K and IRA distributions are reported on 1099- R. Pay special attention to forms I 099-A and l099-C. These report foreclosures and debt consolidations or debt cancellations which may or may not result in taxable income. We need to see them to correctly prepare your return.
Form 1098. Reports mortgage interest paid to a bank, savings & loan or credit union. These forms may also report real estate taxes (if payments are escrowed by the lender).
Other Income. Look for 1099s of state tax refunds, unemployment income, prizes or gambling winnings or rents that you collect. Read each one carefully and keep them with all your other tax documents. Gambling winnings can also be reported on Form W-2G.
Your Records. Review records for possible income or deductions. Add up medical expenses and any taxes paid. If you recall paying a deductible expense but don't have a receipt, jot it down and we will discuss before I prepare your return. Charitable contributions are different - you must have receipts, or your deduction could be challenged and denied! If you are missing a receipt contact the charity to see if you can get the document(s) needed.
Tax Rules by Age
Age 13 - Cannot claim childcare credit for children once they are age 13 or older unless the child is physically or mentally incapable of self-care.
Age 17 - Cannot claim 52,000 child tax credit for children age 17 or older at the end of the tax year.
Age 25 - Taxpayers with no children qualify for Earned Income Credit.
Age 50 - Eligible for catch-up contributions to IRAs, Simple lRAs, 401(k), 403(b) and 457 plans.
Age 55 - Eligible for penalty-free withdrawal from employer plan (but not an IRA) if separated from service.
Age 59 1/2 - Penalty for early withdrawal from retirement accounts expires.
Age 65 - Taxpayers with no children no longer qualify for Earned Income Credit.
Age 65 - Eligible for additional standard deduction ofSl,300 if married and $1,650 if unmarried.
Age 70 1/2 - Contributions no longer allowed to traditional IRAs. Legislature is now looking to extend this age. Law has not been enacted as of this time.
Age70 1/2 - Required Minimum Distributions (RMDs) from retirement plans
Would you like to read a past issue. Please check out one of these issues:
Year End 2019
Year End 2018
Year End 2017
Year End 2016
Year End 2015
Year End 2014
Year End 2013