As
mentioned in this week’s BUZZ installment, I attended the National Association
of Tax Professionals’ annual year-end tax update “The Essential 1040” on Monday
at Bally’s on the Boardwalk in Atlantic City.
I attend this one-day seminar every year, and have done so for over 30
years, and also occasionally attend the second day, “Beyond the 1040” (although
not this year) depending on the topics being discussed.
Bally’s
is a good location. I have no complaints
about the classroom facility or my room, which, as a member of the Total
Rewards program, was extremely reasonable – certainly cheaper than that at any
other location this class is offered. This
year the seminar included, as it does every year, a relatively skimpy, and
definitely not diabetic-friendly, continental breakfast buffet, and an
afternoon dessert break. And, for the
first time in 30+ years, the cost of the event included a box lunch (also not
diabetic-friendly), paid for by a sponsor who gave a presentation for those who
wanted to listen.
As a
“stand-alone” offering the seminar was, as usual, excellent, and covered just
about everything tax preparers need to know to prepare 2018 Form 1040s. But, as I said to my business banker on the
phone on Monday morning, I was listening to what I had already been told 3
times this year. Because the only real
new development for 2018 was the GOP Tax Act, and I had already attended 2
full-day sessions exclusively on the Act and one 2 hour review of it as part of
the NATP Forum, almost everything covered at this seminar was truly redundant
for me. I did, however, learn a couple
of new things, which I discuss later in this post.
One
saving grace – because there was so much to cover with the new Act this year’s
seminar did not include the usual 2 hours of redundant and unnecessary (for me)
ethics preaching. So, one paid for eight
50-minute hours of real education and one actually got eight 50-minute hours of
real education.
I
had signed up for classes that I knew would cover the GOP Tax Act scheduled
later in the year, like this one, because I had hoped that the IRS would be
releasing new regulations, interpretations, clarifications and information
about the tax law changes. Unfortunately, very little new details have
been released.
Three
things continue to be reinforced by GOP Tax Act seminars and discussions –
(1) There
is still a lot we don’t know yet about how many of the provisions of the Act
will be interpreted and implemented.
(2) Because
the Act was basically written overnight, the wording of the law is often
defective, confusing and unclear.
“Technical corrections” legislation is clearly needed.
(3) It
is very obvious that those who actually write tax law and the idiots in
Congress who vote on it have absolutely no concept of the practical
implementation of the tax legislation they write and pass, or of the actual
preparation of tax returns.
Of
this I am certain - by the time we tax professionals fully learn and understand
the ins and outs of the new law, the IRS has released all the appropriate
regulations, and the Tax Court has clarified the issues of confusion, the Act
will expire and we will be back to the Tax Code as it was for 2017.
And
the more I review the new “postcard”
Form 1040 and its 6 supplemental schedules the more I come to believe that
this is probably the stupidest thing
ever in my 45+ years in the tax preparation business.
So,
here is what I learned at the seminar -
* It
appears that the Form 1098-T will no longer be as useful as “tits on a bull”.
The
PATH Act of 2015 correctly required educational institutions to report the total
amount of payments received for qualifying tuition and fees from a student
during the year. Previously, in most
cases, only the amount billed was reported.
The institutions cried that they needed more time to rewrite their
software to be able to generate this information (if you ask me a total load of
malarkey) and the IRS granted them delays in complying with this new
requirement.
Some
good news. It looks like all educational
institutions must comply with this requirement for all 2018 Form 1098-T
forms. The draft of the 2018 form shows
Item #2, the section previously used to report amounts billed, blocked out with
no description and the instructions say this line is “reserved for future use”.
* Sub-chapter
S corporation shareholders who have
·
reported a loss from Form K-1, or
·
received a distribution of profits
(other than a salary or expense reimbursement), or
·
disposed of shares of stock in the
corporation, or
·
received a loan repayment from the
corporation
must now attach a computation of their S-corporation
stock and loan basis to their Form 1040.
The draft copy of the 2018 Schedule E includes a new column on Page 2
for entries on Line 28 which states “Check
if basis computation is required”. This
is not the result of the GOP Tax Act or any tax legislation, but a new requirement
established by the IRS.
*
Computers and peripheral equipment are no longer considered to be “listed
property”.
Listed
property was first created in the Tax Reform Act of 1984. This act restricted the depreciation
deduction for business use of items “lending
themselves easily to personal use” and established requirements, such as
keeping a log, for substantiating personal and business use. Computers and peripheral equipment – except for
such equipment used 100% for business at a “regular
business establishment”, which could include a qualified home office – had been
on the “list” of “listed” property. I explained
listed property in a 2008 post here at TWTP – click here.
The
GOP Tax Act removed this equipment from the “list”. Now computers and peripherals can be
depreciated or expenses like any other business property and are no longer subject
to the additional substantiation requirements.
* The
ridiculous excessive “due diligence” requirements for tax preparers, causing us
to become social workers, will now apply to returns for taxpayers claiming the
new Other Dependent Credit (ODC), as well as the Earned Income Credit, the
American Opportunity Credit, the Child Tax Credit, and, also new for 2018, Head
of Household status. The draft copy of
the 2018 Form 8867 includes the ODC in one of the columns.
This
nonsense is getting out of hand.
Originally the excessive due diligence was only to be required for returns
claiming refundable tax credits like the Earned Income Credit or the Additional
Child Tax Credit. As I have said in
other venues, soon tax preparers will be required to make random bed checks of
taxpayer homes during the year to check on where a claimed dependent is
sleeping.
*
Veterans who received disability severance payments, that were originally
reported as taxable income, from January 18, 1991 through 2016 can file amended
returns (IRS Form 1040-X) for all applicable years (not limited to “open” tax
years) to claim a refund for the tax paid on this income. This is a result of the “Combat-Injured
Veterans Tax Fairness Act of 2016”.
There
is an IRS established “safe harbor” amount or refund claim based on the year of
payment –
1991 – 2005 = $1,750
2006 – 2010 = $2,400
2011 – 2016 = $3,200
Qualified
veterans do not have to complete the entire Form 1040-X to calculate the refund
due. They can elect to submit a shell Form
1040-X with the personal information (name, SS#, address, year) and enter the applicable
safe harbor amount on Lines 15 and 22.
As with anything else related to taxes, claiming the safe harbor refund
or calculating the actual refund based on the original return depends on the
specific facts and circumstances. If you
quality consult your, or a, tax preparer.
NATP
continues to erroneously, in my opinion based on my research and what I have
been told by experts, teach that casual gamblers can now also deduct on
Schedule A travel expenses to casinos, racetracks, etc. if losses do not equal
or exceed gains.
The
IRS draft instructions for the 2018 Schedule A does not mention this alleged
change – it specifically identifies deductible gambling losses as non-winning
tickets under the discussion of “Other itemized deductions” and makes no mention
of any change in the “What’s New” section.
I have seen nothing “official” from the IRS that says what NATP is
teaching.
I
have no more federal tax CPE scheduled between now and the beginning of the
2019 tax filing season. So, I will have
to rely on finalized IRS forms, instructions and publications, and future
online and print articles, for further guidance on the implementation of the
tax law changes. As I learn new “stuff”
I will tell you about it here at TWTP.
TTFN