What’s New for the 2019 Tax Filing Season?

2019 Whole Ball Of Tax

Wolters Kluwer Reviews Critical Changes Taxpayers Need to Know

(NEW YORK, NY, March 2019) —Tax Cuts and Jobs Act provisions effective generally for the first time on 2018 tax returns promise to make the 2019 tax filing season one of the most challenging in many years, with changes that will affect virtually all taxpayers. Treasury and the IRS have been working throughout 2018 and into 2019 to adopt implementing regulations.

“Taxpayers will find much has changed in the tax law for both individuals and businesses, and those changes will present both challenges and planning opportunities to try to maximize the tax benefits,” said Mark Luscombe, JD, LLM, CPA and Principal Federal Tax Analyst for Wolters Kluwer Tax & Accounting.

The following are some of the more significant federal tax developments and regulations that are generally effective for 2018 tax returns:

  • Implementation of Individual Tax Provisions

    For individuals, the most basic changes are lower rate brackets, doubling of the standard deduction and elimination of personal exemptions. It is estimated that 90 percent of taxpayers will now be better off claiming the standard deduction rather than itemizing deductions. This is the result not only of the increase in the standard deduction but also a scaling back of many of the itemized deductions. Other significant changes involved an increase in the child tax credit, an increase in the AMT exemption amount, and a new 20 percent deduction for owners of pass-through businesses. Key guidance for individual tax issues has included:

    1. Final regulations on the 20 percent deduction for pass-through businesses
    2. Proposed regulations on investing in Qualified Opportunity Zones
    3. Proposed regulations on contributions in exchange for state or local tax credits
    4. Proposed regulations on tax return preparer due diligence with respect to claiming head of household filing status

    Almost all of the individual tax changes expire after 2025.

  • Itemized Deductions and Tax Refunds

    The new legislation includes new lower limits on mortgage debt for the mortgage interest deduction and a new $10,000 cap on the state and local tax deduction. Casualty losses will only be allowed for federally-declared disasters. Miscellaneous itemized deductions that had been subject to a floor of 2 percent of adjusted gross income, such as unreimbursed employee business expenses and tax preparation fees, have also been eliminated. On the other hand, the AGI threshold for the medical expense deduction has been lowered to 7.5 percent for a couple of years and the AGI limit for charitable contributions has been increased to 60 percent. Since reduced itemized deductions were not reflected in the new 2018 withholding tables that typically reduced withholding and increased take-home pay in paychecks, the IRS had been encouraging taxpayers all year to review Form W-4 with their employer to reduce withholding allowances for loss of itemized deductions. It appears many taxpayers failed to do so and are receiving lower refunds than anticipated.

  • Government Shutdown

    The lengthy government shutdown resulted in many IRS employees furloughed and an initial indication that tax refunds could be delayed. The IRS eventually brought many furloughed employees back to work without pay to try to start the tax season on time and issue refunds on time. Still, it appears that refunds are being issued at a somewhat slower pace than last year and taxpayer assistance appears less responsive than in past years.

    Many key provisions of the Tax Cuts and Jobs Act significantly affected businesses. These included significantly lower corporate tax rates, a move to a quasi-territorial tax system, greater write-offs of capital purchases, more limited interest expense deductions, more limited use of net operating losses. Significant guidance for businesses has included:

    1. Limitations of the deduction for business interest expense
    2. Investing in Qualified Opportunity Funds
    3. The additional first-year depreciation deduction
    4. The transition tax under Code Sec. 965
    5. The Base Erosion and Anti-Abuse Tax
    6. The foreign tax credit
    7. The Code Sec. 951A Global Intangible Low-Taxed Income
  • Tax Guidance for Businesses

    Many key provisions of the Tax Cuts and Jobs Act significantly affected businesses. These included significantly lower corporate tax rates, a move to a quasi-territorial tax system, greater write-offs of capital purchases, more limited interest expense deductions, more limited use of net operating losses. Significant guidance for businesses has included:

    1. Limitations of the deduction for business interest expense
    2. Investing in Qualified Opportunity Funds
    3. The additional first-year depreciation deduction
    4. The transition tax under Code Sec. 965
    5. The Base Erosion and Anti-Abuse Tax
    6. The foreign tax credit
    7. The Code Sec. 951A Global Intangible Low-Taxed Income
  • Unfinished Business

    Congress has a number of tax proposals still on its plate, some of which could still potentially affect 2018 tax returns. These include:

    1. Technical corrections to the Tax Cuts and Jobs Act, some of which have a significant impact on the treatment of Qualified Improvement Property and net operating losses
    2. More than 30 tax breaks that have expired for 2018 and have not yet been extended
    3. Making permanent the individual provisions of the Tax Cuts and Jobs Act that are currently scheduled to expire after 2025
    4. IRS reform provisions
    5. Retirement reform provisions

About Wolters Kluwer Tax & Accounting

Wolters Kluwer Tax & Accounting is a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency.

Wolters Kluwer Tax & Accounting is part of Wolters Kluwer (WKL), a global leader in professional information, software solutions, and services for the healthcare; tax and accounting; governance, risk and compliance; and legal and regulatory sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with advanced technology and services.

Wolters Kluwer reported 2018 annual revenues of €4.3 billion. The group serves customers in over 180 countries, maintains operations in over 40 countries, and employs approximately 19,000 people worldwide. The company is headquartered in Alphen aan den Rijn, the Netherlands.

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