Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

  • Enter your email address to subscribe to this blog and receive notifications of new posts by email.

    Join 654 other followers

  • Blog Stats

    • 268,445 hits
  • Posts By Day

    June 2018
    M T W T F S S
    « May   Aug »
     123
    45678910
    11121314151617
    18192021222324
    252627282930  
  • Subscribe

  • Special Pages

Archive for June, 2018

Modifying the 1040 For TCJA

Posted by taxguru on June 30, 2018

This time of year is when IRS routinely starts working on updating the tax forms for next Tax Season.  The draft versions of the forms are posted on the IRS website for people to comment on.  I like to check it every few days for the new releases of forms that I use a lot.

I rarely say this, but this year, with the sloppily written TCJA taking effect, I actually feel sorry for the IRS form designers, as well as the State tax agencies that base their taxes on Federal numbers.  As any tax pro will tell you, our GOP rulers in DC passed a tax law that in many respects resembles a big pile of elephant poop and IRS has the thankless task of trying to bring it to life by modifying existing tax forms and designing new ones. With such aspects of the TCJA as the brand new and extremely convoluted 20% QBI deduction, who knows what the form or schedule for that will look like? 

The first stabs at the 2018 1040 form have hit the IRS’s Draft Forms webpage, along with the following press release.

IRS Working on a New Form 1040 for 2019 Tax Season

Accounting Today posted the following article on the newly revised forms:

IRS and Treasury preview postcard-size Form 1040

Whether this qualifies as actual tax simplification or not is open for interpretation.  As they mention in the news release, they are eliminating the 1040A and 1040EZ forms and forcing everyone to start with the same newly revised basic 1040.  Not having prepared a 1040A or EZ in well over 35 years because they didn’t have a place for paid preparers to sign, I personally have no problems with those forms biting the dust. 

However, the claim that tax returns will now be “postcard sized” is not exactly the entire story.  While it may be true that the basic 1040 form will be half the size physically (8.5” X 5”) as the normal 1040 has always been (8.5” X 11”), it will still be necessary to attach a lot of supplementary forms and schedules to support the numbers being entered onto the 1040 summary pages.  It is no secret that I have never used e-filing with IRS or any State tax agency due to the complexity of the returns I prepare which require a lot of supporting pages.  With double sided copies, we often send out tax returns for clients to file that are one or two inches thick.  With this new tax law, I don’t think we will have any reason to retire the heavy duty staplers we use.

On the IRS’s draft form web-page, they have just released their first public look at the new 1040 for 2018, along with the first six new backup schedules, creatively named Schedules 1 through 6.  These backup Schedules basically consist of the lines that were removed from the 2017 1040 in order to make it half-page size.  Whether that works out well or not remains to be seen.  With all of the other forms and schedules full sized, I think it will be a bit awkward to mix them with half pages.  It doesn’t look like the IRS Service Centers will be having much fun processing paper returns with mixtures of different size pages.

I have downloaded all of them and taken quick looks at them.  You can download them yourselves from the IRS website or from the following direct links. 

Form 1040 – U.S. Individual Income Tax Return

Form 1040 (Schedule 1) – Additional Income and Adjustments to Income

Form 1040 (Schedule 2) – Tax

Form 1040 (Schedule 3) – Non-refundable Credits

Form 1040 (Schedule 4) – Other Taxes

Form 1040 (Schedule 5) – Other Payments and Refundable Credits

Form 1040 (Schedule 6) – Foreign Address and Third Party Designee

Quick Observations:
Totals from Schedules C, E & F will go onto the new Schedule 1

Schedule 5 includes a lot of lines called “Reserved” showing how confused IRS is with the new tax law, as we all are.

 

I also feel sorry for the tax preparation software engineers, who will be up to their eyeballs with all of the form changes.  The 2019 Tax Season will be messy, to say the least.

Update 7-11-2018:
IRS has just posted its first draft of the 2018 Schedule A on its website.

Posted in Tax Forms, TCJA | Comments Off on Modifying the 1040 For TCJA

Tax Season Down Under

Posted by taxguru on June 30, 2018

Most people know that, being on the other end of the planet, Australia’s weather seasons are backwards from ours here in the USA.  When we are in the Summer heat, they are in Winter’s cold, and vice versa. 

What I didn’t know until recently is that their Tax Season is also opposite ours.  While we report our personal income tax data on a January 1 – December 31 calendar year basis, the Aussies are required to keep their books on a tax year from July 1, 2017 through June 30, 2018.  They even have a special name for June 30, EOFY (End Of Financial Year). Their tax return “lodging” time for that tax year is from July 1, 2018 through October 31, 2018.

Their equivalent to our IRS is the ATO, the Australian Taxation Office.

I actually learned about this from this bit from this week’s episode of “Weekly With Charlie Pickering,” which I have recently become a big fan of.

 

Click here for a lengthy discussion by the Gruen panelists on how many products are advertised for June 30 EOFY sales, including the fact that last minute purchases of business items are tax deductible. It’s very similar to our December 31 year-end sales here in the US.

Posted in Australia, tax season | Comments Off on Tax Season Down Under

Estate Planning Mistakes

Posted by taxguru on June 10, 2018

It’s not just income tax laws that are constantly changing and requiring strategic modifications.  Estate planning is also a moving target that requires constant course corrections, especially with the recent big tax law changes.  

Just as I have always considered it extremely dangerous for people to attempt to prepare their own tax returns, it is at least ten times riskier to try to handle estate planning without the assistance of an experienced estate attorney.  The books and software that are available at places such as Nolo Press are great for learning about the estate planning process and preparing for your meeting with the attorney who will be doing the actual paperwork, but trying to do everything on your own is insane.

I came across this excellent Kiplinger article by New Jersey CFP Eric Reich, on the Jewish World Review website

10 Surprising (or Surprisingly Common) Estate Planning Mistakes

I have seen examples of many of the scenarios mentioned in this very informative article.  I could even add some to this list, which I will do when I have more time.

Posted in Estates | Comments Off on Estate Planning Mistakes

Toying With IRS Phone Scammers…

Posted by taxguru on June 2, 2018

Funny and educational story arc in this week’s Sally Forth comics, illustrating how widespread these scam calls have become. 

Click on pic to get full size version.

SallyForth-IRSScamCall(5-28-18)

SallyForth-IRSScamCall(5-29-18)

SallyForth-IRSScamCall(5-30-18)

SallyForth-IRSScamCall(5-31-18)

SallyForth-IRSScamCall(6-1-18)

SallyForth-IRSScamCall(6-2-18)

Hopefully, this will help prevent more people from falling victim to the scumbags. Not everyone has gotten the message from conventional sources, such as these recent IRS news releases.

IRS continues warning on impersonation scams; Reminds people to remain alert to other scams, schemes this summer

Taxpayers should stay alert because scammers don’t take a summer vacation

Posted in scams | Comments Off on Toying With IRS Phone Scammers…