Wow! Weren’t we promised that taxes were going to be easier? Remember that picture of the president kissing the new “postcard tax return?!”
Well, tax simplification is in the works. We now have a “draft” copy of the “postcard.” The results….it isn’t a REAL postcard -it can’t be mailed. It has names and social security numbers on it! It will have to be mailed in some kind of secure fashion (good old fashioned envelope!?). So, each envelope will have to be opened and an IRS employee will most likely enter the data into an IRS computer.
Wait a minute…what happened to electronic filing – the be-all and end-all of government efficiency? That was a good idea, but now it seems we are working our way back toward the stone-age. For what? A campaign photo op?
Tax Simplification Makes Good Sense
People with relatively simple financial lives should be able to file their own taxes (electronically or by mail) without the aid of a tax professional. Using averaged standard deductions would allow many to complete tax returns themselves. So does the “Post Card in an envelope” provide that option? Let’s say you have a salary, a house, some medical expenses, an IRA, etc. Will you be able to file your taxes on the simplified form?
Maybe, yes…maybe, no. It simply may be too confusing to determine if you will benefit from itemizing deductions, for one thing. What we see in the new “draft” form is a typical IRS form, masquerading as a post card that will not simplify tax filing for very many people. It is short for sure, but primarily because the type size has been reduced to the point many will need new prescription glasses to read it and many supporting schedules will be required. (When you next run across your magnifying glass, keep it handy!)
Now, let’s not forget that the tax tables for 2018 have been altered and as a result are generating reductions in withholding from your wages. This may feel good in the paycheck, but no one knows for sure that the reduced withholding will be sufficient for the taxes you will ultimately owe. This is something we have been urging you to pay attention to through the year.
To help with this piece…..The IRS just came out with a new W4 form for employees to complete and determine their withholding rate beginning in 2019. It’s almost like asking the employee to complete their income tax return first and then provide a summary to the employer. In fairness to the IRS the 11 pages of instructions (yep….11 pages!!) try to explain and instruct!
Overall, there will be tax cuts for some and simplification for a few, but chances you will benefit from both are unlikely. Careful tax planning and education will continue to be important…..maybe even more so than ever. We are here to help throughout this year and beyond.