The Internal Revenue Service (IRS) has started accepting 2019 tax returns since January 27, 2020 and you may well want to consider an early filing, too. But before you submit your 2019 tax return, you should consider getting the services of Liberty Tax since there are items that have been removed and items that have come back.
You don’t want to miss out on opportunities for reduced tax payments, perhaps even for tax refunds, just because you missed out on these things! On the flipside, you don’t want to pay penalties because you miscalculate your taxes. So, let’s take a look at what’s gone and what’s come back in 2020 – for your 2019 returns, of course.
What’s Gone for 2019 Returns?
The IRS has a habit of changing the rules of the tax game on a whim, or so it seems to ordinary taxpayers. There are certain things that have gone and many of these spell bad news for taxpayers, mainly because these means lesser items to write off as expenses.
These items include but aren’t limited to the following:
- Tax preparation fees, which cannot be written off as costs from 2018 to 2025. But there’s an exemption to the rule: Self-employed taxpayers can deduct their tax preparation fees as part of their business expense.
- Job search expenses aren’t deductible, too, a bummer when you’re down to your last dollar while job-hunting for a better job.
- Moving expense deductions have been cut since 2018 and it remains in effect in 2019. But there’s also an exemption: Military personnel in active duty can deduct their moving expenses, such as board and lodging, shipping cars and pets, and transport of belongings, when relocating as part of their military orders.
- Moving expense reimbursements are also out of the deductible items. But it should also be noted that employers are required to add all the employee’s moving expenses in the latter’s wages; the wages, in turn, are subject to employment and income taxes.
- Business expenses of employees that have been unreimbursed by their employees aren’t considered deductible on 2019 tax returns, as it was in 2018, too. (Tip: If you don’t want to shoulder business expenses and then end up not being reimbursed for it by your employer, you should discuss an accountable reimbursement plan with your employer)
- Casualty losses, specifically personal casualty and theft losses, aren’t deductible in general. But if your casualty losses occur in “presidentially declared disaster area”, then these will likely be allowed as deductions; ask your tax advisor about it.
If you have health insurance in 2010, you don’t have to provide proof about it or give a reason for your exemption. There isn’t a box anymore for healthcare on the 1040 form. You don’t have to pay penalties, too, or claim exemptions in case you didn’t have health insurance in 2019.
Again, discuss these matters with your tax advisor! You may just be exempted in the sense that you can still claim certain items as deductions while other taxpayers can’t for one reason or another. As with many things in government, there’s likely an exception to the rule that you can, well, take advantage of.
What’s Back for 2019 Returns?
In December 2019, President Trump signed a law that resurrected certain tax breaks. Known as the extenders package, it covered three tax years – 2018, 2019 and 2020.
If you qualified for tax breaks covered by the law, you may want to consider amending your 2018 return. Just be sure to do a cost-and-benefit analysis to determine whether the cost of tax return amendments are less than the money saved or not. Otherwise, you may as well keep your 2018 return as is, especially if changing it means more trouble than you can make time for on your end.
Ask your tax advisor whether these so-called zombie tax breaks are cost-efficient in your case.
- College tuition and fees can be deducted from your income, thus, decreasing your taxable income. But it has its income limits and it’s allowable only up to $4,000. If you’re a single individual with a modified adjusted gross income (MAGI) of up to $65,000, then you can claim it; married individuals filing a joint return with MAGI of up to $130,000 also qualify. But if you’ve taken the American Opportunity or Lifetime Learning Credits, then you can’t claim it as a deduction.
- Mortgage debt forgiveness is back again! This is good news, indeed, as you don’t have to report forgiven debt as income. But it has its limits, too – only up to $2 million of the mortgage debt should be forgiven by the creditor.
- Medical expenses are still deductible on 2018 to 2020 returns. But remember there are income thresholds and other qualification requirements. For example, unreimbursed medical expenses more than 7.5% of adjusted gross income can be deducted.
Finding as many deductibles applicable to your case is, indeed, a task well worth giving your attention to! You must then be more organized in keeping the receipts and other documents that show your expenses for the year.