The 2019 tax season is coming up in a few months.
Due to the 2018 tax reform bill, small-business owners and W-2 employees are likely to see differences on their tax returns in the coming year.
“In the long run, it will be good for most taxpayers, but this first year is going to cause a lot of headaches. A lot of people are going to be upset, because you’re thinking your taxes are going to go down. They very well might, but they may not go down as much as you thought,” said David A. Crumbaugh, a certified professional accountant with 27 years of experience.
He presented a “Stop Overpaying” seminar at Mounteith Abstract and Titles Killeen office on Oct. 11.
“I’m trying to get everybody prepared. This (tax act) may benefit us, but I don’t know how much it will benefit us,” Crumbaugh said.
The Women’s Council of Realtors Central Texas hosted the credit tax class.
As part of the tax reform, the standard deductions were increased to $24,000 for married couples, $12,000 for single filers and $18,000 for single “head of household.” However, married couples and single filers with children may notice a change in deductions on tax returns.
“What they (Congress) didn’t tell anyone is they got rid of the dependent deduction,” Crumbaugh said.
Families are not the only group losing deductions. W-2 employees are not receiving the miscellaneous itemized deduction anymore. However, companies are creating reimbursement plans. Employees can submit expense reports to get reimbursed.
Self-employed individuals need to reconsider how they work with clients. Meal and entertainment expenses are not deductible. This standard form of customer services is no longer a tax tool. However, these individuals need to keep their business meal receipts.
“The IRS came out with guidance this past week. Business meals are still 50 percent deductible as long as they are not too lavish. When you go out with someone, your meals are still deductible as long as you’re talking business,” Crumbaugh said.
Eligible filers need to subtract tips and alcohol from their meal deductions. If they are audited, they may owe the IRS money.
Individuals should consider the risk versus reward of the home office deduction. If employees are offered a workspace, they should not take the home office deduction.
“If you are renting, take the deduction. You don’t get to deduct your rent. You don’t receive a lot of deductions when you’re a renter. Carve out a space for your home office,” Crumbaugh said.
Online services, like TurboTax, are adjusting to the 2018 tax reform bill, but a certified professional accountant can help clients determine which risks are worth taking.