Yes, it’s more Tax Cuts and Jobs Act talk. It’s the blog gift that keeps on giving, and promises to keep on giving through next tax season, too.
When I have written about this blast of tax reform, I have attempted to not be political about it. What one feels about the reform matters little here, for we must operate under the rules passed no matter what they area. A recent survey commissioned by the Republican National Committee, though, says that many are not happy with the reform measures.
I came across this news in an article on Accounting Today, where it was reported that respondents, by about a two-to-one margin, believe that reform favors the rich. Breaking it down into just whether people approve of the measures passed (because hey, if you’re rich and you think it favors the rich, you’re all for that), 45 percent of people were against the moves and 44 percent were in favor. That sounds like a good microcosm of our country right there.
I only imagine that stories like this are going to proliferate as we move toward tax season. There will be ever more predictions about what tax returns are going to look like, and then we will have feedback once the returns are filed. This isn’t wrong, we should have opinions in a democracy. I do, however, urge you to separate that a bit from your actual tax prep.
Again, these are the rules, we have to abide by them. Some of you reading this are going to love the new rules when you see your return, some of you reading this are going to curse the new rules when you see your return. Just remove that emotion from the actual filing.
Instead, do the things you’re supposed to do, follow the rules you’re supposed to follow. We will help you use them to your greatest advantage and understand why things work the way they do. Whether or not anyone likes it.
On another note, the Treasury Inspector General has figured out what caused an outage at the IRS on Tax Day 2018 that put quite a crimp in that last-day flurry of activity.
Granted, this doesn’t seem like it should have taken months to figure out – I mean, they did fix the problem, right? Shouldn’t that tell them what went wrong to some degree? – but at least the news was good. Good for everyone who isn’t the IRS anyway.
The final conclusion was that it was a firmware problem. The timing still makes this completely embarrassing for the agency, but at least it wasn’t any sort of outside attack that brought things down. I write a lot in this space about keeping your information safe, and what the IRS does to help achieve this goal, and I do think they deserve some credit for what they do well.
Just stay tuned a week or two, I’m sure we’ll be able to talk about something it doesn’t do well, too.
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Granted, this is probably because I had different things to worry about when it passed, but I didn’t think about how the Tax Cuts and Jobs Act would affect tax fraud. A recent article from Accounting Today, though, takes a look at how some proponents claimed that it would have this effect.
Spoiler alert: there is not a whole lot of optimism among tax professionals that that will be the outcome.
On one hand, it is easy to see how people felt that less fraud would be a positive outcome. The setup of the new plan is that more people will be taking fewer deductions, and that seems like it would provide fewer places for people to cheat.
On the other hand, as some interviewed in the article allude to, it just means that people will probably look for other places to pad their numbers. What this seems to come down to is that the rules are different, but it is not as if people are any more thrilled with paying taxes.
And illegal actions aside, people should look for places where they can use the new rules to their advantage. Contrary to what some say, it is not as if taxes have suddenly become simple. The rules are complex and those with the proper knowledge will find ways to use it to their advantage. This isn’t fraud, and even should be encouraged, but the mindsets are similar – getting the most that you can returned to you.
Also mentioned in the article is the funding of the IRS, something that tax reform did not really handle. The agency has been receiving less funding for years and now has to implement a large number of new rules. It is easy to see how this could lead to more things slipping through the cracks. This is never something one should count on, though.
As a personal note, I am sure the new rules will also lead to new mistakes. I only call them mistakes because not everyone is going to know how to work within the new rules and it will lead to honest errors. The IRS won’t simply overlook these, though.
No one likes to pay taxes, and only a very simple system would present a situation where people could not try to turn things to their advantage and also know they’re doing everything correctly. The complicated system isn’t going away, though, so just be sure you operate in a legal way with the proper support. That is just good practice no matter the rules and what we always strive to provide.
Another good practice to mention now is thinking of disaster plans. I know I spoke of this last week, but with the destruction from Hurricane Florence that followed, I thought it would do well to mention it again. Especially after I read this article about how many businesses don’t have a disaster plan, never mind individuals.
Again, this is something that is not fun, but something is worth spending the time to do.
As I also mentioned last week, the IRS does offer some relief for those affected by natural disasters, and this has happened for those affected by the latest storm. For those who want the official data on it, please click here.
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Occasionally my job is just to remind you of things you may have heard before, things that that the IRS wants to make sure you remember. A lot of these things are usually dictated by the calendar.
So to start, estimated tax payments can be due for many on Monday, September 17. This is something that may need to be spoken about more as an increasing number of people earn their living in non-traditional ways. You see, taxes are supposed to be paid as you earn money. This isn’t a big deal if you have a W2 job, for that money is being taken out of your paycheck each time you are paid.
If you do not earn a large portion of your money in such a way, though, and expect to owe taxes at the end of the year, the IRS really wants you checking in with it four times a years and making estimated payments toward that tax bill. If you do not do that, you could face penalties when you next file your tax return.
If this is something you want to check in on and see if you should be making such payments, don’t hesitate to contact us.
The calendar is also telling us that it is hurricane season again, and as images from the news remind of the potential disaster of these events, it is also worth a reminder that you want to take some actions to protect your finances from acts of nature.
So first, think about where your key documents are kept. If you have something that would be difficult to replace if lost, it should be protected. A safe that can guard against most disasters may be more affordable than you think, and what it pays back in peace of mind could even more valuable. And this should not only be physical documents, think about where the digital information is kept, and ensure that it is not in only one location.
Second, documenting the valuables in your home could help you recoup their value if you ever have an insurance claim. This is even easier than getting a safe now that almost everyone carries a phone with a camera in their pocket all the time. A series of photos of your valuables can help support any claims you have to make.
Lastly, when large disasters do strike, there is often some deadline leniency given by the IRS when it comes to making payments or filing forms. This is only small solace, but it is something to remember and be thankful for when you are dealing with larger, more pressing life issues.
Overall, all of these little bits come down to being proactive and not procrastinating. Those are lessons that are always worth remembering no matter the subject or date. So as always, if there is anything that you have been wanting to do with your finances, be it personal or business, let us know. We would love to help, and if we cannot, we can at least point you in the right direction.
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I feel like this blog is either going to be shouted into the void or have you shaking your head because I have said these things already and you are sick of hearing them. I’m going to say them one more time, though, in the hopes that maybe it can catch someone new before going off into that void.
Simply put – next time you file your taxes, the rules are going to be different, and you should check your withholding now to know where you will stand when it comes time to file.
I am saying this based on a recent article from accountingtoday.com, where many in the tax industry speak to their concern that not enough people are doing this and some could be in for a surprise when they see their return.
I think part of this may come from politics. If someone is in favor of the basic changes that were made, they may expect positive ramifications. And with the increases in the standard deduction, this is a reasonable expectation.
But do you have children? Were you previously taking a mortgage interest deduction? Are you counting on charitable contributions still having an impact? That increased deduction is going to be a simple positive for many, but it decreases or negates the impact of other deductions. There are also other changes in the law that affect other areas of your return so that the standard deduction’s impact is lessened.
As I have also said before, tax law is complicated, and it remains complicated even under the new system. A full reporting doesn’t really fit on a postcard (and yes, I’ve said that before, too), so it’s not something that you can hope to figure out without a deep look.
So why not take that deep look? You have four months still to put yourself in a good position and know what to expect come filing time. That is time you can make work for you, but time that is continually dwindling.
A final note from this article that I want to highlight is one interviewee’s statement on how people think the rich have some secrets they use within the tax system, when really they just are better prepared and paying more attention throughout the year. This is so true that it deserves notice.
Do you want to make it feel like you aren’t paying that much in taxes? Plan throughout the year, so that you’ll know what the bill is going to be. And when you know that, you can have the proper money either taken out of your paycheck or made in quarterly payments so that the burden feels manageable.
So from here on out, I’m going to try to not mention this anymore. I have said it’s worth checking up on these things, now you can see an article where many others say the same thing, and we’re months after the passage of the Tax Cuts and Jobs Act, so you have had time to take action.
Consider this then my ‘I told you so,’ if you decide not to do a tax checkup now, so that I don’t have to say it in a few months.
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