It hit me like a ton of bricks the other day: 2019 is almost over. With just over 100 days left in the year, it’s time to consider any remaining tax issues for 2019 that could affect your return or plans for your business.
Overall, it’s been a pretty quiet year in terms of changes to tax code. The TCJA was passed in 2017, so we got a hand in dealing with it last year, and we likely won’t encounter much in 2019 filing that we did not in 2018. Still, there are a number of expiring provisions on the horizon as well as technical corrections that could come down the pike in the next few months. You need to prepare yourself and your business, as well as make any necessary logistical moves so you can take advantage of these tax provisions before they leave us at the end of 2019.
So, there’s a little uncertainty, but we know a few things for sure. Here’s what you should consider at this point:
10 Uncertain Tax Issues To Consider Before Year-End :
1. Form 1040
The new draft 2019 Form 1040 is substantially different from what we saw in 2018. Half of the new schedules that were added in 2018 have been dropped or combined with other schedules: Schedules 2 and 4 combined, Schedules 3 and 5 combined, and Schedule 6 moved to the 1040 itself. The line count for this year is roughly the same as last year.
Unlike 2018, the signature section is at the bottom, which just means you’ll be signing on the same page where final tax numbers appear.
Obviously, the length of the form and signature placement won’t impact your life much. Just keep in mind that what’s available now is just a draft form 1040 that will likely change a bit before filing season begins. Do not file draft forms.
2. Form W-4
IRS received a number of complaints about underwithholding in 2018 that resulted in additional taxpayers owing tax who were accustomed to receiving refunds. The 2019 draft form, therefore, eliminates the concept of allowances since allowances were tied to the personal exemption, which has been eliminated.
3. Additional new tax forms
The IRS is issuing a number of new tax forms for 2019:
- 1040-SR: Congress mandated a new tax form for seniors which is easier to read and includes a standard deduction chart.
- 8995 and 8995-A: These forms are to be used for calculating the qualified business income deduction, with 8995 being the simplified version and 8995-A for more complicated situations.
- 965-C, 965-D, and 965-E: These forms relate to various aspects of the taxation of unrepatriated foreign income.
- 8978: This form is designed to address a partner’s payment of a portion of the partnership’s imputed unpaid audit liability under Code Sec. 6226.
- 8985: The IRS has indicated that it plans to issue a new form titled “Pass-Through Statement.”
- 8997: In addition to Forms 8949 and 8996 with respect to Qualified Opportunity Zones, Form 8997 will be used as a report of initial and annual changes to Qualified Opportunity Fund investments.
4. Medical expense deduction
The medical expense deduction threshold, which was reduced to 7.5% for 2017 and 2018, has reverted back to a 10% threshold for 2019. That could change with Congressional action.
5. Health insurance mandate
There has been a good deal of confusion about this since the penalty for failure to obtain individual health insurance expired at the end of 2018 and a Texas district court ruled that the Affordable Care Act must fall if the individual mandate was eliminated (though that ruling has been suspended during the appeal process).
With the end of the individual mandate, there is no inquiry on the 2019 tax form about whether the individual taxpayer had health insurance or not, but the employer mandate remains in effect. Do not fall out of compliance, as penalties are steep and currently being issued.
Effective starting Jan. 1, 2019, alimony is no longer deductible to the payer and is no longer taxable to the payee for divorce or separation instruments executed on or after that date. Since the deduction was often more valuable to the payer than the tax hit to the payee, this is generally a net negative for taxpayers.
Instruments executed prior to 2019 but modified in 2019 or later may choose in the modification to be governed by the old or new rules.
Contact your BGW team member if you went through a divorce in 2019.
7. Employer credit for family and medical leave
2019 is the last year for the employer credit for family and medical leave created by the Tax Cuts and Jobs Act.
8. Qualified Opportunity Zones
2019 is the last year in which a contribution to a Qualified Opportunity Fund may qualify for the maximum 15% increase in basis for forgiveness of a portion of the deferred gain. After 2019, the maximum forgiveness falls to 10%.
9. Tax breaks for beer, wine, and distilled spirits
Believe it or not, the TCJA contained several tax breaks related to beer, wine, and distilled spirits. If you’re in the business, get with your BGW team member right away to take advantage of them before they expire at the end of 2019.
10. Inflation adjustments
As is the case every year, a number of tax provisions are subject to inflation adjustments from the prior year. There are also a few provisions that had new amounts under the Tax Cuts and Jobs Act, such as Code Sec. 179 expensing, where the inflation adjustments start for the first time in 2019.
In general, we expect fewer complications and moments of confusion during the 2019 tax return filing season than we may have experienced in 2018. Still, it’s a good idea know what’s coming and, more importantly, make the right moves now to take advantage of expiring tax credits and deductions. We’re here to help.