Tax Season is Upon Us!
This tax season is the most exciting one in decades. We have our first chance to see the impact of the tax reform that President Trump signed into law at the end of 2017. The policy debate now gives way to the facts. Did the middle class really receive the tax cut they were promised? Or did all the benefits go to corporate America and the ultra-wealthy? One thing we know already – our politicians were not creative enough to pay for this tax cut. The federal deficient is expected to hit a record $1 trillion (when written out in long form, is $1,000,000,000,000. Yes, that’s 12 zeroes) for the year 2019.
Enough about policy. The most important thing to do as you prepare your 2018 tax return is to throw out all of your preconceptions about whether you qualify for a particular tax break. The rules have changed. For example, the number of people who are able to claim the deduction for charitable giving is expected to decline from 37 million last year to 16 million this year. Sadly, the realization of the loss of this deduction is expected to have a direct impact on charitable donations going forward.
While the fever for change to our tax law was fueled by the claim that the tax code would be simplified to the point that a tax return could be done on a mere post card, something altogether different emerged from Congress. Surprise, the tax code is even more complex. Therefore, millions of Americans will continue to turn to paid tax preparers.
Unfortunately, most folks are unaware that nearly all states have more regulatory requirements for hairdressers than tax preparers. Certified public accountants, tax lawyers, enrolled agents credentialed by the IRS, and certain unpaid volunteers are the only tax preparers subject to testing and regulatory oversight. The lack of oversight has led to widespread and endemic problems across the industry. Mystery shopper testing done by the government agencies and consumer advocacy groups over the last several years have revealed high levels of errors and instances of fraud, ranging from 25% to over 90%.
Accordingly, Bordas & Bordas recommends tax-payers consider a credentialed preparer, such as a Certified Public Accountant (CPA), an enrolled agent, an attorney, or a preparer who has voluntarily completed the IRS Annual Filing Season Program. A directory of credentialed preparers is available on the IRS website. Often a CPA can prepare your return for similar or even lower pricing than the chain store fronts.
A free or inexpensive alternative for low-income taxpayers is a free tax preparation site. These include VITA sites (1-800-906-9887 or https://irs.treasury.gov/freetaxprep/) and AARP Tax-Aide sites (www.aarp.org/findtaxhelp). Choosing a VITA or AARP Tax-Aide site saves eligible taxpayers the cost of a tax preparation fee. Many VITA sites can also help taxpayers open a bank account or get a low-cost prepaid card, which enables taxpayers to get refunds faster via direct deposit without paying a fee.
We wish you a good return this year!
Image courtesy of Unsplash.
Today's blog: Tax season will be here before you know it - are you prepared? We compiled a list of to-dos ahead of the looming April 15 deadline to help you undertsand how the tax reform code may affect you and your family.