Well…it’s over. This year’s individual tax return filing deadline has come and gone. As the dust settles and we take stock of this year’s tax season, a few trends have appeared.
The 2018 tax season saw the greatest change to the tax code in over 30 years. With it, came uncertainty and confusion. But from confusion, comes an opportunity for learning and growth. Here are a few of our lessons learned:
- People who engaged us in planning in early 2018 saw significant benefit– Clients who engaged us early in 2018 were able to maximize their advantage. Timely planning allowed for early course corrections and enabled them to get the most out of provisions in the new law.
- Some provisions of the new tax code were clear as mud– The IRS is still interpreting and creating guidance on some of the provisions that have been in effect for over a year. Only time will tell when the IRS will be able to issue final guidance on all of the changes.
- Organizing and filing early paid dividends– Clients who were organized and submitted their materials for preparation early, on average, fared better than those who did not. This shouldn’t be surprising though. Procrastinators are far more likely to miss possible tax breaks because they cannot find supporting material.
- The shutdown did not have as much of an effect as some feared– For the most part, our clients received their refunds in a time-frame consistent with other years. While support wait times were higher than in previous years, the IRS did an admirable job of minimizing the impact to taxpayers.
- Refunds were impacted, but not too greatly (for most) – When the IRS changed the withholding tables to reflect the new tax laws, they took into account the rate changes, but failed to account for other changes that left some under-withheld. The IRS has already made changes to the withholding tables for 2019, but they do encourage you to use their paycheck checkup tool to make sure you have the proper withholding.
Some clients received an unpleasant surprise because they were hit with earnings they weren't expecting. But keep in mind, a large refund means you gave the government an interest free loan of your money throughout the year.
- The QBI Deduction is a Big Deal – For those with Qualified Business Income (QBI) and who were able to deduct 20% of the income from their pass-through businesses, Schedule C or E income, this new deduction was a game-changer. It provided significant tax savings for many of our self-employed and business-owning clients.
- Many, but not all, benefited from the new, doubled standard deduction– Many ended up getting the biggest benefit from the standard deduction that was doubled under the TCJA. The challenge was that in order to know whether someone fared better under the standard deduction or itemized deduction, taxes had to be prepared both ways. This added a degree of complexity and time to some preparations.
Thank you for another successful tax year! If you have not already done so, we highly encourage you to engage us now to help you plan and strategize for the 2019 tax year. If you have any questions about your 2018 taxes, or you’d like to plan for 2019, contact us.