10 Tax Changes that Could Affect Your 2019 Return

January 6, 2020

Our team of tax and accounting professionals stays on top of complex and ever-changing tax laws, so you don’t have to. But it’s always helpful to be aware of updates that might impact your return. Scan this quick list of changes from the past few years, and be sure to communicate related activity to your tax advisor before preparation season begins.

Rental Property: If you own rental property, the IRS now demands substantially more information. FOR EACH PROPERTY SEPARATELY, we will need the physical location, the type of property (single-family, duplex, etc.), any Forms 1099-K received, and a record, by property of the number of days rented and the number of days used for personal purposes.

Mortgage Interest: We must obtain Form 1098 from you when you pay mortgage interest. Additionally, we must obtain refinancing closing statements, and if you drew money out on a home mortgage or refinancing, we must have general information on the use of the money according to the IRS. Mortgage interest deductions changed with the tax reform bill, so we may need to ask additional questions once we review your documents.

Virtual Currency: The IRS issued guidance for taxpayers and preparers related to digital transactions of virtual currency. One such compliance measure is a checkbox on your Form 1040. Please be sure to complete the related question on your engagement letter, so we can accurately understand your virtual currency activity.

Foreign Accounts: If you have an account, retirement account or business interest with a value over $10,000 in a foreign country or a foreign business ownership (not through a mutual fund), please let us know as some special rules will apply to you. There are substantial penalties for failure to disclose these items!

Pass-Through Entities: Under the new law, pass-through entities – such as partnerships, S corporations, limited liability companies (LLCs) and sole proprietors (such as schedule C, E and F) – can claim a 20% deduction on earnings, subject to special rule restrictions. The deduction might not be available to higher-income personal service providers.

Entertainment Deductions: The deduction for business-related entertainment has been repealed. Businesses can still generally deduct 50% of the cost of qualified meals.

Affordable Care Act: The tax reform bill repealed the health insurance mandate after Jan. 1, 2019. However, if you purchased health insurance through the Marketplace for 2019, we’ll still need Form 1095-A to prepare your return.

Personal Exemptions: Personal exemptions, including those available for qualified dependent children and relatives, have been repealed.

Dependent Credits: The IRS Form 8867, Due Diligence Checklist is required for the earned income credit, the child tax credit and the American Opportunity Credit. If a dependent is listed on your return, the IRS requires us to get documentation to substantiate the credits. Documentation for the earned income and child tax credits could include school records, medical records or childcare provider records, among others. Documentation for the American Opportunity Credit includes Form 1098-T and receipts for the qualified tuition and related expenses.

Charitable Contributions: Deductions of any amount must have a receipt. Individual contributions over $250 must also have an acknowledgement letter from the charity, and the letter must be dated by the date we file your return. The letter should show the date and amount of any individual contribution over $250 and should also state that no goods or services were received in return for the contribution. Remember, if you charged a charitable contribution to a credit card by 12/31/2019, we are able to deduct it in 2019.

We’re happily accepting new tax clients this season! If you’d like Wymer Brownlee to prepare your 2019 return, please return your signed engagement letter and updated client data sheet by March 9, 2020. After your 2019 tax information is received, don’t be alarmed if you don’t hear from us again until your return is ready to review. We’ll be busy working behind the scenes, but we’ll contact you if additional information or clarification is needed. The earlier we receive your signed engagement letter and tax documents, the faster we can turn around your completed return.

 

Blog by Crystal Harmon, Tax Director.

 

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