Which tax breaks stay the same in 2019?

Many tax breaks survived the Tax Cuts and Jobs Act unscathed. This is not an exhaustive list, but here are some tax deductions and credits that weren’t affected at all:

•             Capital gains and qualified dividend taxes

•             The Child and Dependent Care Credit

•             The American Opportunity Credit

•             The Lifetime Learning Credit

•             The Student Loan Interest deduction

•             Tax deductions for retirement savings

•             Big changes to the alternative minimum tax

Many legislators had initially sought a repeal of the Alternative Minimum Tax, or AMT, but it still exists in 2018 and beyond. If you aren’t familiar with it, the AMT is designed to ensure that high-income taxpayers pay their fair share of taxes, even if they’re entitled to tons of deductions and credits.

Taxpayers still need to calculate their taxes twice — once under the standard method and again using the AMT — and pay whichever results in a larger bill. Don’t worry, though — your tax-preparation software program will determine if you need to be concerned about the AMT. However, there were a couple of significant changes made by the new tax law.

First, AMT exemptions never were indexed for inflation. This became the main problem with the AMT — because it didn’t change over time with purchasing power, it began to apply to more and more Americans. The AMT never was designed to affect the middle class, but it had started to do just that. From here on out, the AMT exemption amounts will be indexed for inflation.

Second, the AMT exemption amounts themselves, as well as the phase-out limits at which they start to go away, have been increased significantly.

The personal exemption is gone

To be perfectly clear, although the standard deduction has roughly doubled, it doesn’t mean that people are getting double the tax break — far from it.

While the standard deduction has increased, the valuable personal exemption has gone away. The reasoning for this is that, in addition to a tax cut, lawmakers were also attempting to simplify the tax code. So instead of giving taxpayers a standard deduction and several exemptions, these two things were essentially combined into a higher standard deduction.

In plain English, a personal exemption is a certain amount of income Americans can exclude from their taxable income each year. In prior tax years, Americans could claim one personal exemption for themselves, their spouse, and one for each dependent.

In the 2017 tax year, each personal exemption was an effective $4,100 tax deduction. And there was no limit to the number of personal exemptions that could be claimed. For example, a married couple with six dependent children could claim eight personal exemptions. You can see how the higher standard deduction may not exactly be a gift — especially for larger families.

No more Obamacare penalties, starting in 2019

While the Republican administration and Congress have thus far been unsuccessful in repealing the Affordable Care Act, the Tax Cuts and Jobs Act did eliminate the individual mandate — aka the “Obamacare penalty.” This is the penalty you pay for not having health insurance.

One important caveat: The penalty is only repealed in tax years 2019 and beyond. If you didn’t maintain qualifying health coverage throughout 2018, you still may face the penalty when you file your tax return in 2019.

In closing, Capital Advisory Group has been helping business owners with tax liability mitigation and wealth strategy for over 40 years. We’re here to help business owners and entrepreneurs use tax laws to your benefit. We’ll help you to understand how the tax laws work, and how they are designed to reduce your taxes, not to increase your taxes. Once you understand these basic principles, you no longer need to be afraid of the tax laws. They exist to help you and your business—not to hinder you.

I hope you found this piece informative and are able to take away some actionable tactics. Please let me know how I can be a resource for you in any way. I do this all the time and would love to show you exactly how!

Email me or give me a call (636) 394-5524 to schedule your strategy session today! Thank you! You are appreciated!

Jeff Zufall, Capital Advisory Group. 

Questions about taxes could come up any time of the year. Whether it’s about tracking a refund or paying a bill, taxpayers can find answers to their questions on IRS.gov. Here are some of the most popular IRS tools:

• IRS Free File. Taxpayers who filed an extension can use IRS Free File to prepare and e-file a federal tax return. Free File is available at no cost for anyone with income below $66,000. Free File is available through Oct. 15 to file a 2017 tax return. IRS Free File is available through IRS.gov or the IRS2Go mobile app.
• Direct Deposit. Direct Deposit is the best and fastest way for taxpayers to get their tax refund electronically deposited for free into their financial account. Combining direct deposit with electronic filing is the fastest way for a taxpayer to receive their refund.
• Where’s My Refund? Taxpayers can use “Where’s My Refund?” at IRS.gov or the IRS2Go mobile app to check the status of a refund within 24 hours after the IRS receives the e-filed return or four weeks after a mailed paper return. The IRS2Go app is free and available on Google Play, the Apple App Store or Amazon App Store.
• Paying a Tax Bill. IRS Direct Pay is free and taxpayers can pay directly from a checking or savings account. They can choose to receive email notifications about their payments each time they use Direct Pay There are five simple steps to pay in a single online session and it’s also available with the IRS2Go mobile app. Other payment options are available at IRS.gov/payments.
• Tax Account Information Online. At IRS.gov/account individual taxpayers can view their balance and payment history. They can also pay with their bank account, a debit or credit card or apply for an installment agreement. They can view, print or download tax records, and view their most current tax return information as originally filed. First time users must authenticate their identity through the Secure Access process. Taxpayers who already have a user name and password from Secure Access for their tax account, Get Transcript Online or Identity Protection PIN, may use the same username and password.
• Online Payment Agreement. Taxpayers who can’t pay their taxes in full can apply for an Online Payment Agreement. Using the Direct Debit payment plan option is a lower-cost, hassle-free way to make monthly payments.
• Interactive Tax Assistant. Taxpayers can use this tool to find answers to their tax questions. This tax law resource asks a series of questions and provides instant answers on a variety of tax topics, including general filing questions, deductions, credits and income.
• Tax Map. The IRS Tax Map integrates web links, tax forms, instructions and publications into one search result. Taxpayers can quickly find forms, publications, frequently asked questions and news by topic.

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IRS Tax Reform Tax Tip 2018-143

September 13, 2018

Retirees should do a Paycheck Checkup to make sure they are paying enough tax during the year by using the Withholding Calculator, available on IRS.gov. The Tax Cuts and Jobs Act, enacted in December 2017, changed the way tax is calculated for most taxpayers, including retirees.

Because of this law change, retirees who receive a monthly pension or annuity check may need to raise or lower the amount of tax they pay in during the year. The easiest way to do that is to use the Withholding Calculator or read Publication 505, Tax Withholding and Estimated Tax. Though primarily designed for employees who receive wages, this online tool can also help those who receive pension or annuity payments on a regular schedule, usually monthly or quarterly.

Taxpayers who do not choose to have taxes withheld from their income should make estimated tax payments. This income includes pension and annuity income, and the taxable part of social security benefits. Estimated tax payments are due quarterly. The remaining due dates for 2018 payments are Sept. 17, 2018 and Jan. 15, 2019. Taxpayers can pay their taxes anytime throughout the year as long as they indicate the tax year and where to apply the payment. They can visit IRS.gov/payments to explore all IRS payment options.

Here are some things retirees should know about their withholding and using the calculator:

• Like employees, retirees can use the calculator to estimate their total income, deductions and tax credits for 2018.

• When using the Withholding Calculator, retirees should treat their pension like income from a job by entering:
  • The gross amount of each payment
  • How often they receive a payment, such as monthly or quarterly
  • The amount of tax withheld so far this year

• Before using the calculator, users should have a copy of last year’s tax return. In addition, knowing or having a record of the total federal income tax withheld so far this year will also make the tool’s results more accurate.

• Based on the taxpayer’s responses, the Withholding Calculator will recommend the number of allowances a pension recipient should claim. If the number is different from the number they are claiming now, they should fill out a new withholding form. If claiming zero allowances still doesn’t cover their expected tax bill, the tool will recommend asking their payor to withhold an additional flat-dollar amount from each pension payment.

• Pension recipients can make a withholding change by filling out Form W-4P, and giving it to their payor. The IRS urges retirees to submit Forms W-4P to their payors as soon as they can. This gives payors time to apply withholding changes to as many payments as possible this year.

• Because of the limited time left in 2018, some retirees may be unable to adequately cover their expected tax liability through withholding. In that case, a taxpayer could instead make an estimated or additional tax payment directly to the IRS.

More Information:

Publication 505, Tax Withholding and Estimated Tax

Social Security Administration

Tax Reform

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IRS Tax Reform Tax Tip 2018-142

September 12, 2018

The U.S. tax system operates on a pay-as-you-go basis. This means that taxpayers need to pay most of their tax during the year, as the income is earned or received. Taxpayers must generally pay at least 90 percent of their taxes throughout the year through withholding, estimated or additional tax payments or a combination of the two. If they don’t, they may owe an estimated tax penalty when they file.

Taxpayers can pay their taxes throughout the year anytime. They must select the tax year and tax type or form when paying electronically. Filers paying by check should make it out to the “United States Treasury” and indicate the tax year and type of taxes they are paying.

Taxpayers who pay taxes through a combination of withholding and estimated tax payments should do a Paycheck Checkup. They can do a checkup using the Withholding Calculator on IRS.gov. Doing so now can help the taxpayer avoid an unexpected tax bill and possibly a penalty when the taxpayer’s 2018 tax return is filed next year.

Here are some examples of people who may need to make estimated tax payments:

Individuals – including sole proprietors, partners and S corporation shareholders – may need to pay quarterly installments of estimated tax if:

• they expect to owe at least $1,000 when they file their tax return
• they owed additional tax when they filed their tax return last year

Other taxpayers who may need to make estimated payments include those who:

• have more than one job, but don’t have each employer withhold taxes
• are self-employed
• are independent contractors
• are representatives of a direct-sales or in-home-sales company
• participate in sharing economy activities where they are not working as employees

For tax year 2018, the remaining estimated tax payment due dates are Sept. 17, 2018 and Jan. 15, 2019.

More Information:

Publication 505, Tax Withholding and Estimated Tax

Form 1040-ES, Estimated Tax for Individuals

Tax Reform

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September 10, 2018

Certain taxpayers must make estimated tax payments throughout the year. Taxpayers must generally pay at least 90 percent of their taxes throughout the year through withholding, estimated tax payments or a combination of the two. If they don’t, they may owe an estimated tax penalty.

For tax-year 2018, the remaining estimated tax payment due dates are Sept. 17, 2018, and Jan. 15, 2019.

Estimated tax is the method used to pay tax on income that is not subject to withholding. This income includes earnings from self-employment, interest, dividends, rents, and alimony. Taxpayers who do not choose to have taxes withheld from other taxable income should also make estimated tax payments. This other income includes unemployment compensation and the taxable part of Social Security benefits.

The IRS urges everyone who works as an employee and who also earns or has income from other sources to perform a Paycheck Checkup now. Doing so will help avoid an unexpected year-end tax bill and possibly a penalty when the taxpayer files their 2018 tax return next year. They can do a checkup using the Withholding Calculator on IRS.gov.

Here are some things to know for taxpayers who make estimated payments :

• Taxpayers can pay their taxes throughout the year anytime.
• Filers paying by check should make it out to the “United States Treasury” and indicate the tax year and type of taxes they are paying.
• Taxpayers in presidentially-declared disaster areas may have more time to make these payments without penalty.
• For easy and secure ways to make estimated tax payments, use is IRS Direct Pay or the Electronic Federal Tax Payment System.
• gov/payments has information on all payment options.
• Taxpayers can find more information about tax withholding and estimated tax at the Pay As You Go page IRS.gov.
• Publication 505, Tax Withholding and Estimated Tax, is another resource for taxpayers. Publication 505 has worksheets and examples, which can help taxpayers determine whether they should pay estimated tax.

More Information:

Form 1040-ES, Estimated Tax for Individuals

Tax Reform

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