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A Less Stressful Tax Season in 2020?


Is it me, or does April 15th seem to come around too quickly? We are subjected to this distasteful annual ritual with a frequency that is sure to drive your tax preparer crazy, even if that preparer is you!

Full disclaimer: we are not tax preparers, nor tax attorneys, and we cannot, and do not, give tax advice. Rather, as financial planners, we work with our clients in the arena of tax planning. This requires a fundamental understanding of the U.S. Tax Code, as well as the rules for investment accounting.

There is some good news this tax season, however, in that many fewer Americans are itemizing deductions since implementation of the Tax Cut and Jobs Act of 2017 (TCJA). IRS Form 1040 in the years since TCJA is shorter and applicable to most Americans. As a taxpayer’s tax complexity grows, various Schedules and Forms are required to be included with the filing.

In order to see if you might benefit by itemizing tax deductions, the place to start is by examining your last year’s (2018) return. (We will be filing 2019 returns this year.) Last year, we had no basis for a direct comparison under the new Code, as 2017 returns were filed under pre-TCJA rules. This year, we do have a basis for comparison. Here are some items to check from your 2018 tax returns:

  • Income. Has your income changed dramatically, whether in magnitude or source? If not, you are likely to file a Form 1040 that resembles last year.
  • Tax Deductions. Did you itemize, or did you claim the Standard Deduction for 2018? Look at Line 9 of last year’s 1040 and see if it is a recognizable number, such as $12,000, $18,000, $24,000, or $26,600. If so, you did not itemize deductions, and your planning for 2019 will likely be easy.
  • Tax-Related Forms. Income verification forms, including W-2s and 1099s, are beginning to arrive for 2019. Accumulate those forms and pay attention to two areas; the amount of income, and the amount of Federal Income Tax withheld.
  • Do I need a Professional Preparer? There will be many more taxpayers this year who find that they no longer need a professional tax preparer. These taxpayers include people who took the Standard Deduction for the first time in 2018, and did not have a long series of Schedules attached. (Naturally, many people want to use a professional anyway, for comfort and accuracy, and we fully support them.) 

For the most part, it is no longer necessary to keep every receipt in a shoe box, or to carefully document every medical expense, no matter how small. Very few people will qualify for a medical expense deduction, and State and Local (SALT) Tax Deductions have been limited to $10,000 annually. If your SALT doesn’t exceed that limit, it is unlikely that you will be an itemizer anyway.

The Tax Code is a little friendlier under TCJA. Understanding the 2018 changes could make this tax season less unpleasant. Start by understanding your 2018 return, and perhaps your stress level will be lower between now and April 15, 2020. Wouldn’t that be a nice change?

Van Wie Financial is fee-only. For a reason.