Over the years, many clients have told me that coming to visit me is as bad or worse than visiting the dentist. I am always offended and taken back that someone could view the tax preparation process as similarly scary and painful as visiting the dentist. I mean, who doesn’t take pleasure in the joyous and wonderful event that is preparing income tax returns? With so much excitement inherent in the process, how can we not all be giddy with anticipation? Ok, maybe I don’t speak for the vast majority of tax-paying Americans after all.
The IRS will open its system to accept e-filed returns beginning Monday, January 29th. We will begin accepting tax preparation appointments that day as well. We will begin sending out electronic tax organizers today so be on the lookout for yours if you are a current client. The partnership and S-corporation filing deadlines are Thursday, March 15th, and Tuesday, April 17th, respectively, this year. Please also remember that forms W-2 and 1099-MISC are due to be delivered to employees and contractors by Wednesday, January 31st, again this year. Starting this year, the filing of these forms with the government is also due on the same date. In prior years, employers had an extra month to file the forms with the government.
As I discussed in last month’s blog, the new tax law passed in late December. Keep in mind that the vast majority of the changes brought about by the new law didn’t take effect until January 1, 2018. Therefore, the tax returns we are getting ready to prepare will not be affected too much by the new law. We will be trying to point out how the new tax law will affect our clients for tax year 2018 and beyond when we prepare their 2017 returns this season.
The new law is a mixed bag, but I think it is safe to say that a majority of Americans will see their tax liability decrease as a result. There will be some who don’t see that benefit or may even owe more in tax due to the new tax law. Everyone will lose the personal exemption deduction which provided a deduction per taxpayer and dependent of $4,050 per person against income before taxes were calculated. For many, however, the lost personal exemption deductions will be offset by the nearly double standard deduction that is now offered. In addition, those with dependents who are 16 years old and younger will see their child tax credit double which should make a huge difference in their bottom line. That credit rose from $1,000 per child to $2,000 per child assuming the taxpayer has overall tax liability sufficient to utilize the entire $2,000 credit per child in that tax year. If the tax liability for the year is not sufficient to utilize the child tax credits, the taxpayer will still receive $1,400 of the credit per child as a refundable credit.
Since tax rates and brackets decreased, in general, most wage earners should see an increase in take-home pay sometime in February when the new rate brackets are incorporated into their employer payroll process. The IRS has stated that it will be producing a new form W-4 later this year but has advised that the current W-4s currently in place will work fine with their new rate brackets.
Many people have heard that the C-corporation (generally large companies) progressive tax structure has been replaced by a flat rate system of 21%. The new law also threw a bone to small company owners in the form of a 20% net income deduction for pass-through entities such as S-corporations, partnerships and sole proprietorships. The concept is that the net income for the year of the flow-through entity would be eligible for a 20% reduction before calculating tax at the individual level as that income flows through to the taxpayer. The effect of this provision is that a flow-through entity owner would not pay any more than 29.5% on that income. That is not as beneficial as the C-corporation 21% flat rate, but it leveled the playing field somewhat.
Lastly, the new tax law repeals the individual insurance coverage mandate effective January 1, 2019. As such, tax years 2017 and 2018 are still subject to the individual mandate imposed by the Affordable Care Act.
If you are a continuing client, please look for your 2017 electronic tax organizer to come by email soon. Once you have completed the organizer, you will return it to us electronically. At that point, you can schedule an in-person appointment with Andrew Hales or me, if desired, or simply send us your tax documents and information, as applicable. This year, for the first time, we will be accepting appointments not only by phone, but also using our new application, Calendly. Every email sent out by our office includes a blue link above the signature bar which will allow you to see the availability of Andrew or me and to schedule an appointment with us directly. There is also a separate blue link just above the Calendly link that you can use to securely upload files to us.
If you are not a current client of Weech Financial, PLLC, we offer a free initial consultation which provides a great opportunity for us to review your prior year returns, answer your questions, and allow you to determine if we are a good fit for your accounting or tax needs. Please contact us today.