If you thought there wouldn’t be much in the way of tax news in January during the government shutdown, you would be wrong. January was an exciting month, as the IRS clarified rules that were changed or introduced in the Tax Cuts and Jobs Act in December 2017. Here’s a quick rundown of some of the biggest news you need to know as you gear up for a busy tax season
Section 199A: 20 percent deduction for pass-throughs
If you thought you knew how to navigate the new rules Congress passed in section 199A, concerning a 20 percent deduction for pass-through entities, think again. The IRS just released the Final Regulations, plus two IRS Notices, about section 199A on January 18, 2019. We found two articles from Forbes that summarize the regs and go over questions some of your clients may be asking you.
The long and the short of it is: This section is one of the most confusing in the new tax bill. Now that the Final Regulations have come out, don’t rely on any previously published proposed regs. Don’t rely on the tax software, which probably hasn’t been updated yet. Make sure you know what’s in the regs themselves, now that the IRS has finalized them.
Study shows people distrust tax systems but trust accountants
An international study polled people around the world to find out how much they trust their tax systems. The results should be heartening to professional tax preparers. While people generally distrust their government tax systems and NGOs, citing concerns about a lack of transparency, corruption, complexity and inequality, they do trust their accountants and lawyers.
This news isn’t entirely surprising at The Income Tax School, since we train some of the best and brightest! Our courses set high standards for future tax pros. In fact, in the study, people cited the high ethical and professional standards that tax professionals and other financial professionals are held to as one of their reasons for their trust. However, it’s nice to see such good news about how people trust tax professionals.
IRS says it will show leniency for errors
Senators Chuck Grassley and Ron Wyden, top senators on the Senate Finance Committee, urged the Treasury Department to show leniency for underpayment and withholding issues as taxpayers get used to the changes brought about by the new tax law. Fortunately, officials listened. Treasury Department officials just announced they will waive some penalties for individuals if they meet certain criteria. Find out which tax penalties will be waived and how individuals and small business owners can qualify.
Big refunds for military spouses?
A law that took effect on December 31, 2018, and which is retroactive for the entire year, would allow military spouses to claim the same state of residence as their service member spouse – meaning some spouses could get sizeable refunds from their state income taxes, if they are living and working in a state that’s different from the one they claim as their residence. Get the details on how the new Veterans Benefits and Transition Act works and how military spouses can benefit.
AICPA stands up for “a fair and administrable tax system”
The American Institute of CPAs sent a letter to officials at the Department of the Treasury and the IRS. The letter outlined their concerns about the effect of the government shutdown on the IRS and on taxpayers nationwide. AICPA Tax Executive Committee chair Annette Nellen wrote in the letter, “The need for unhindered availability of a fair and administrable tax system is rising as we approach the opening of tax filing season.” Accounting Today published a good summary of the letter and of some of the effects of the government shutdown.