Thursday, January 31, 2019


Public Law 115-97 – officially “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018” - also known as “The Tax Cuts and Jobs Act”, but best described as the GOP Tax Act - takes effect with the 2018 federal income tax returns that have begun to be filed. 

This new law has drastically changed the United State Tax Code.  For tax years 2018 through 2025, or until new tax legislation is enacted, the GOP Tax Act will affect every income tax return filed.

The GOP Tax Act is the Republican equivalent of the Democrat’s Obamacare.

Both Acts were based on a good concept that dealt with a legitimate issue – making adequate health care more affordable for and accessible and providing needed tax reform.  But the main purpose of passing both Acts was to get an early legislative victory for the Party’s newly elected President.  Both were written hastily and poorly, the GOP Tax Act practically overnight, without serious thought or discussion.  And were voted on hastily, without serious debate. 

In both cases, none of the members of Congress who voted on these Acts, from both Parties, actually read the legislation they were voting on.  They were told how to vote by the leaders of their respective Parties, and for the most part the members obeyed.

And both Acts contained some good and some bad, perhaps more bad than good.

Obamacare required insurance companies to provide coverage for pre-existing conditions, and provided taxpayers with a tax credit directly applied to monthly premium payments to reduce the out of pocket cost, but created an excessive financial penalty for not having health insurance coverage, added the NIIT surtax to investment income and created other nickel and dime taxes, fees and charges, and made health insurance premiums age-based.

The GOP Tax Act did contain some simplification via the elimination and limitation of tax deposits, some good and some bad, increased the Standard Deduction, reduced tax rates, and effectively did away with the dreaded Alternative Minimum Tax, but it also contained much new and unnecessary complexity.  It was neither tax reform nor tax simplification.  Thankfully the popular title properly identified it as “tax cuts” and not “tax reform”.   

The Act will make the preparation of some Form 1040s simpler, but also make many more involved and more costly.  Taxpayers in many situations should not be surprised when they discover the fee to prepare their returns is higher than in past years.  
Taxpayers should also not be surprised if their refunds are smaller than expected, or if they actually owe money with the filing of their 2018 Form 1040.  Many have been under-withheld, some seriously.  The Government Accountability Office recently reported that, based on simulations run by the Treasury Department, taxes for at least 30 million Americans — 21 percent of taxpayers — are being under-withheld.

The new withholding tables issued last February were a bit too “liberal”, so workers would think the GOP Tax Act was actually putting more money in their pockets.  And the loss of the personal exemption deduction and many itemized deductions makes previously submitted W-4 forms no longer appropriate.  The IRS has provided some token relief for this under-withholding by revising the calculation of the penalty for underpayment of estimated taxes.

As I have said in the past, the more I learn about the GOP Tax Act the more I find –

(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 members of 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.

So, good luck with the preparation and filing of your 2018 Form 1040.  And be sure to return here after the end of the filing season to read my annual “That Was The Tax Season That Was” post.


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