What you need to know about the new tax law

Two local accountants give tips for navigating your finances

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By Julie Boyd Cole

— If you thought this was the last year you had to file your income taxes on long, complicated forms, you may be disappointed.

Although the President Donald J. Trump administration had reported last year that the new Tax Cuts and Jobs Act would create so simple an income tax return for the average person it would fit on a postcard, the IRS hasn’t created the process yet for 2018 returns.

“I’m not sure if it will be possible to ever do your taxes on a postcard,” said Greenwood Lake accountant Natalia Fisher, E.A. “I think, honestly, our tax system is just too complicated. I don’t foresee it.”

Fisher, of Total Account Ability, has been filing customers’ taxes in New York and New Jersey for 18 years. She said the new tax code, much of which went into effect on Jan. 1 and does simplify some elements, “is still rather complicated.”

Phillip Goldstein, CPA and managing partner of Goldstein, Lieberman and Company, LLC, of Mahwah, agreed that “the new tax law is broad-reaching and complicated.”

“Each individual will be affected differently depending upon their personal financial circumstances,” he said. “The changes will create both increases and decreases in tax burdens, depending on each person’s finances.”

Changes to watchFisher and Goldstein offered some of the changes people need to watch now as they make financial decisions through the year are as followed:

Keep all the same records, mileage, receipts of expenses, and documents they have always kept. Nothing has changed regarding the need to maintain documents or the length of time filers are required to keep the paperwork, she said.

The IRS has not yet created the procedures and forms based on the new code.

People who have used accountants, CPA, and tax preparations firms in the past may still want to use them. The new code has not been simplified enough for the average person to confidently file.

Those who itemized their federal income taxes in 2017 may not in 2018 since the standard deduction has doubled. If the deductions do not reach the new threshold, then filers will not be allowed to itemize.

Many deductions are still allowed in 2018 but may be irrelevant if they don’t add up to the total needed to surpass the new standard deduction. This may adversely affect the annual revenue of not-for-profit corporations as more people move toward using the standard deductions rather than itemize their personal expenses.

There will still be a penalty in 2018 for people who are without health insurance, so don’t give up your coverage. However, the penalty has been repealed beginning 2019.

The amount of state income taxes and property taxes that can be deducted from federal taxes has capped at $10,000 combined. In New York, the governor’s office is working on a plan to mitigate this expense.

The personal exemption has been repealed. No longer will filers be able to exempt $4,050 for every person in their household. Also, moving expenses for a job and expenses for casualty loss (except in the case of a presidential declaration of disaster) are no longer deductible.

The Child Care Tax Credit has doubled to $2,000 and a new credit of $500 for any dependents in a filer’s care has been added.

Educators, including school teachers, will still be allowed to deduct up to $250 for classroom expenses and parents will be able to use the 529 college savings account for K-12 private school tuition.

Mortgage interest on homes loans is still deductible, but the cap on these loans has been reduced from $1.1 million to $750,000. If your home loan is less than that, the interest you pay is still deductible if you are allowed to itemize. Homeownership will no longer bring tax benefits under the new tax law.

Small business owners of pass-through corporations, such as LLC or S corporations, will see some changes when they file their 2018 tax return next year. Owners should continue to pay their estimated income taxes each quarter of this year, keep their business expenses receipts, justifications, and documents, and stay in touch with their tax preparer through the year as the IRS works through the procedures of the new code.

For more information about the new federal tax code, go to irs.gov.
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