Information on Auto-Related Deductions Based Upon Changes from the TCJA

Since the TCJA suspends the deduction for moving expenses for tax years beginning after Dec. 31, 2017 until Jan 1, 2026, the IRS won’t allow deductions for use of an auto as part of a move using the 2018 standard mileage rates. This suspension doesn’t apply to members of the armed forces on active duty who move because of military order. The new law also suspends all miscellaneous deductions subject to the 2% of AGI floor. That means the 2018 business standard mileage rate can’t be used to claim an itemized deduction for unreimbursed travel expenses. The TCJA increased depreciation limitations for passenger vehicles placed in service after Dec. 31, 2017. The maximum standard automobile cost may not exceed $50,000 for passenger automobiles, trucks and vans (up from $27,300 and $31,000 respectively).

IRS Releases Plan to Improve Taxpayer Service the IRS recently released a new five-year Strategic Plan aimed to improve taxpayer service and tax administration. The plan focuses on the following goals that will help improve customer service:

  • Empower and enable all taxpayers to meet their tax obligations.
  • Protect the integrity of the tax system by encouraging compliance through administering and enforcing the tax code.
  • Collaborate with external partners proactively to improve tax administration.
  • Cultivate a well-equipped, diverse, flexible, and engaged workforce.
  • Advance data access, usability, and analytics to inform decision-making and improve operational outcomes.
  • Drive increased agility, efficiency, effectiveness, and security in IRS operations.

Simplifying the Tax Code Causes More Complexities!

While the Tax Cuts and Jobs Act (TCJA) sought to simplify the tax code, it also brought new complexity. For example, a new deduction provides substantial tax savings to people with “qualified business income” (QBI) from their pass-through business but calculating the deduction and limitations is complicated.

Generally, the QBI deduction is 20% of qualified income from a partnership, S corporation, or sole proprietorship. QBI, in a nutshell, is the net amount of income, gain, deduction, and loss with respect to your trade or business. Although we have a framework for the QBI calculation, we still await IRS guidance and clarification. This deduction will benefit many business owners, while phase-in and phase-out rules will reduce or eliminate the deduction for some taxpayers.

Complexities surrounding the new law can be daunting. Give us a call, and we can help you determine the impact that this deduction or other parts of the TCJA may have on your tax situation.


Postcard 1040 Hot Off the Press!!

The Internal Revenue Service and the Treasury Department unveiled Friday a draft version of the postcard-size Form 1040 that was promised from last year’s tax reform effort. For the 2019 tax season, the shorter Form 1040 will replace current Forms 1040, 1040A and 1040EZ so that all 150 million taxpayers can use the same form. The new form uses a “building block” approach, in which the tax return is reduced to a simple form and supplemented with additional schedules if needed. Taxpayers with straightforward tax situations will only need to file this new 1040 with no additional schedules.

Below are links to the recent IRS news releases announcing the revised form.
IR-2018-146: IRS working on a new Form 1040 for 2019 tax season
IR-2018-146SP: IRS trabaja en un nuevo Formulario 1040 para la temporada de impuestos de 2019