There’s a lot of information out there about the new tax bill. But not all of it is true! Here are 10 myths to look out for and the truth behind them.
Taxes will be so simple, I will be able to file on a postcard.
The postcard idea originated with House Speaker Paul Ryan and continues to circulate. The thinking behind it was that by doubling the standard deduction, reducing the amount of tax brackets, and eliminating the need to itemize, that the tax code would be simplified thus making the filing process easier for individual taxpayers. In reality, the final bill still has seven tax brackets and is extremely complex. It layers new tax complexities on businesses and has a number of new regulations.
MYTH # 2
I don’t need to worry about this tax law stuff now since it’s not applicable to this current tax filing season.
The current goal for tax professionals will be to get your 2017 tax return filed, however, we will be happy to discuss how 2018 tax laws will affect you. It is recommended that you file early so that you can implement any changes your preparer recommends before too late. Many changes have to be made by the tax filing deadline. There are things like IRA contributions, W4 changes, and business entity classification changes that will need to be made sooner rather than later to have the greatest impact on 2018.
MYTH # 3
The penalty for healthcare has been eliminated so I don’t need to worry about a penalty anymore if I don’t have health insurance.
Actually, the individual mandate for healthcare is not eliminated until 2019. Current rules still apply to 2017 and 2018.
MYTH # 4
I am a teacher and can no longer deduct any educator expenses.
It was on the chopping block, but it was still retained with the current amount of $250 per educator. It will however, limit the ability to deduct more than the $250 as an unreimbursed expense in 2018 as the unreimbursed business expenses have been eliminated for 2018.
MYTH # 5
I should have pre-paid my 2018 taxes in 2017 so the $10,000 cap on taxes in 2018 would not have a large impact on my 2018 tax return.
You are not alone in thinking this. Local counties in many high tax states were slammed after Christmas with many people making tax payments before the year ends. However, only certain people will be eligible to deduct them. In order for taxes to be deductible in 2017, they must be assessed and paid in 2017 (even if for tax year 2018). Those that are paid prior to receiving an assessment will not be deductible on 2017 returns.
MYTH # 6
There is no point tracking my medical expenses since the AGI limit is 10% for me since I’m under age 65.
Even though there still may not be a point in tracking medical expenses, the AGI limit has been reduced back to 7.5% of AGI for everyone for 2017 and 2018.
MYTH # 7
They haven’t changed the W4 to adjust to the 2018 tax law, so I’m still going to pay too many taxes from my check this year.
The President has asked payroll providers to adjust withholding tables so that workers will see more in their paychecks as early as February with no required changes from the employee. Employees can make changes as well, but it’s almost too soon to know what to expect from tax reform changes. The good news is that paying too much will result in a refund.
MYTH # 8
There is no point donating to charity if I can’t write it off.
This is going to sound strange but, everything is not about taxes! Peoples Tax strongly believes in contributing back to our community. Admittedly, due to the increased standard deduction, many taxpayers may not itemize, and therefore may not see a tax benefit from charitable deductions anymore, however, that alone is not a reason to donate. We can review your situation and see if your charitable donations will be affected.
MYTH # 9
With the doubling of the standard deduction, I’ll no longer itemize, so my tax return will be simple.
Eliminating itemized deductions will not necessarily make your tax return much simpler. Many taxpayers must still include other complicated scheduled and statements with their tax returns and they have other tax complexities. The assistance of a tax professional may still be required to ensure that you pay the least legitimate tax.
MYTH # 10
This tax stuff is too complicated right now, I’ll just file an extension and deal with it later.
This is not the year to wait. We have trained staff that has thoroughly researched the new bill. Even though there are likely to be technical corrections to fix drafting errors and loopholes, we will monitor all changes. We have you covered. Schedule your appointment soon.