Davis Tax Services, LLP

Tax planning, preparation & problem resolution

Tax highlights for 2018 tax year

Filing dates
Despite the government shutdown, the Internal Revenue Service announced that it will process tax returns beginning Monday, Jan. 28 and provide refunds to taxpayers as scheduled.
However, that date may be unrealistic. With seven out of eight IRS employees out of work during the shutdown and a number of forms still to be finalized (and then processing software programmed), the beginning of filing season may still have to be pushed back.
If the IRS is able to handle returns by Jan. 28 but the shutdown lingers, some congressional leaders have said it would be illegal to issue refunds while the shutdown is in effect.
There has been speculation about moving back the April 15 deadline, but that hasn't been formally proposed yet.
Tax forms
The 1040 form has been shortened to a half page. But that doesn't mean simplification -- six new schedules have been introduced to hold the information that previously was on the two-page 1040.
The IRS released the final 2019 form 1040 just before Christmas, but may of the other forms have not been finalized.
You should still receive W-2's and 1099's by the end of January. (Some investment income 1099's have until mid February.)
Tax changes
The IRS has a 14-page summary of the tax reform changes, in case you want to get a sense of the differences for 2018 returns.
Unfortunately, the IRS has yet to issue "guidance" (meaning, it's own internal procedures and public directions) for much of how the new rules will be applied.
It has issued 183 pages of guidance about the new Section 199A 20% deduction for business income, and a considerably shorter FAQ. Even those documents leave a number of questions unanswered.
Itemized deductions
The big change affecting many taxpayers will be the elimination of personal exemptions, replaced by a higher standard deduction. It is likely many taxpayers who have itemized in the past will now take the standard deduction.
While this change may have little effect for singles and married couples who barely had enough to itemize in the past, it is likely to create a serious jump in taxes for families who have had several exemptions for childeren in the past.
Another change likely to hurt is that employee business expenses no longer are deductible. That includes mileage, home office and moving expenses.
Arizona has a much lower standard deduction, however, so lots of people will be able to itemize for the state even if they don't for the federal return. In other words, continue to keep track of your medical expenses, home mortgage interest, property taxes and charitable contributions.
AZ dollar-for-dollar donations
Arizona law provides four credits which reduce state taxes one dollar for each dollar donated to various causes. These valuable credits have also counted as federal charitable contributions.
IRS changed the rules in August. No longer can donations that receive a credit on the state return be deducted on the federal return. This rule took effect Aug. 27, so I'll need to know whether state credit contributions were made before or after that date to apply them correctly this year.