Important 2019 Tax Season Updates
1040 Form Changes
The IRS has released a draft of the new design for the 1040 and yes, it looks a lot different. The form 1040 has been condensed into two half sheets and there are now six new schedules that may been needed for your return. In addition to these new schedules, Schedule A has been updated to limit your tax paid deduction and some other deductions have been eliminated. Schedule B (interest and dividends), Schedule C (business income), Schedule D (Capital gains & losses) and Schedule E (Rental income), have not been changed.
Schedule 1: Additional Income and Adjustments to Income
Additional income such as capital gains, unemployment compensation, or gambling winnings.
Deductions to claim such as student loan interest, self-employment tax or educator expenses.
Schedule 2: Tax
The schedule is for AMT or if you need to make an excess advance premium tax credit repayment.
Schedule 3: Nonrefundable Credits
This form is where you will find the Foreign tax credit, credit for child care expenses, education credit and the residential energy credit.
Schedule 4 - Other Taxes
This schedule is for self-employment tax, additional tax on IRA's and the Health Care individual responsibility tax.
Schedule 5 - Other Payments and Refundable Credits
Estimated tax payments, excess social security.
Schedule 6 - Foreign Address and Third Party Designee
This form is needed if you have a foreign address or you have indicated that you allow another person to discuss this return with the IRS.
2019 Form 1040
Form 1040 Schedule 1
Form 1040 Schedule 2
Form 1040 Schedule 3
New 1040SR (Draft)
1040SR – The IRS has introduced a new form for people born before January 2, 1955. This form generally mirrors the regular 1040; but, you have a bigger font! Personally, those of us here at Hendrick & Kellison LLC who are over 40, think we too should be able to use the form with a bigger font.
The IRS has released a draft of the new design for the 1040 and yes, it looks a lot different. The form 1040 has been condensed into two half sheets and there are now six new schedules that may been needed for your return. In addition to these new schedules, Schedule A has been updated to limit your tax paid deduction and some other deductions have been eliminated. Schedule B (interest and dividends), Schedule C (business income), Schedule D (Capital gains & losses) and Schedule E (Rental income), have not been changed.
Schedule 1: Additional Income and Adjustments to Income
Additional income such as capital gains, unemployment compensation, or gambling winnings.
Deductions to claim such as student loan interest, self-employment tax or educator expenses.
Schedule 2: Tax
The schedule is for AMT or if you need to make an excess advance premium tax credit repayment.
Schedule 3: Nonrefundable Credits
This form is where you will find the Foreign tax credit, credit for child care expenses, education credit and the residential energy credit.
Schedule 4 - Other Taxes
This schedule is for self-employment tax, additional tax on IRA's and the Health Care individual responsibility tax.
Schedule 5 - Other Payments and Refundable Credits
Estimated tax payments, excess social security.
Schedule 6 - Foreign Address and Third Party Designee
This form is needed if you have a foreign address or you have indicated that you allow another person to discuss this return with the IRS.
2019 Form 1040
Form 1040 Schedule 1
Form 1040 Schedule 2
Form 1040 Schedule 3
New 1040SR (Draft)
1040SR – The IRS has introduced a new form for people born before January 2, 1955. This form generally mirrors the regular 1040; but, you have a bigger font! Personally, those of us here at Hendrick & Kellison LLC who are over 40, think we too should be able to use the form with a bigger font.
Consider making a Qualified Charitable Distribution from your Traditional IRA
If you are 70 1/2 and normally make charitable contributions, making them directly from your Traditional IRA may save you taxes. Read more about it here.
Qualified Charitable Distribution
If you are 70 1/2 and normally make charitable contributions, making them directly from your Traditional IRA may save you taxes. Read more about it here.
Qualified Charitable Distribution
What is bunching?
The standard deduction has increased for 2019. This means that many taxpayers will no longer be itemizing on the Federal 1040. You can take advantage of the larger standard deduction by "bunching" your deductions. What does this mean? Read about bunching here.
The standard deduction has increased for 2019. This means that many taxpayers will no longer be itemizing on the Federal 1040. You can take advantage of the larger standard deduction by "bunching" your deductions. What does this mean? Read about bunching here.
Itemizing
You may have heard the most taxpayers will not be itemizing for the 2019 tax year. Because of the new standard deduction ($24,000 MFJ and $12,000 Single) this is true. BUT, most Oregon taxpayers will still be itemizing for OREGON. Currently, the standard deduction for Oregon is $4435 MFJ and $2215 Single. If your itemized deductions add up to more that the Oregon standard deduction then you will itemize for Oregon only. So yes, we will still need information about your mortgage interest, property tax paid and charitable contributions.
You may have heard the most taxpayers will not be itemizing for the 2019 tax year. Because of the new standard deduction ($24,000 MFJ and $12,000 Single) this is true. BUT, most Oregon taxpayers will still be itemizing for OREGON. Currently, the standard deduction for Oregon is $4435 MFJ and $2215 Single. If your itemized deductions add up to more that the Oregon standard deduction then you will itemize for Oregon only. So yes, we will still need information about your mortgage interest, property tax paid and charitable contributions.
Oregon is requesting driver's license information
Oregon is requesting this information as a way to better validate identities and prevent tax refund fraud through identity theft. Providing driver's license information is not required but return processing could be delayed if it is not provided. If filing jointly, the secondary filer's information is helpful, but the primary filer's information is the most important.
Oregon is requesting this information as a way to better validate identities and prevent tax refund fraud through identity theft. Providing driver's license information is not required but return processing could be delayed if it is not provided. If filing jointly, the secondary filer's information is helpful, but the primary filer's information is the most important.
Filing a 1099
Filing 1099s for Rentals – This is an area where there is disagreement among professionals as to whether or not you should file 1099s for amounts you paid for services on your rentals. For example a reportable transaction would be if you paid Joe Smith Hot Tub Service LLC $75 a month to maintain your Sunriver rental’s hot tub. Our office recommends that you file 1099s for anyone that is not a corporation that you paid over $600 to for services during the calendar year. This is new this year and if you have questions on this filing requirement check this FAQ sheet that was sent to our clients with rentals.
The IRS has increased the penalties for failure to file a 1099. If you made or received a payment during the calendar year as a small business or self-employed (individual), you are most likely required to file an information return to the IRS. Please click in the following link or contact our office if you think you may need to file a 1099. Am I required to file a Form 1099?
Filing 1099s for Rentals – This is an area where there is disagreement among professionals as to whether or not you should file 1099s for amounts you paid for services on your rentals. For example a reportable transaction would be if you paid Joe Smith Hot Tub Service LLC $75 a month to maintain your Sunriver rental’s hot tub. Our office recommends that you file 1099s for anyone that is not a corporation that you paid over $600 to for services during the calendar year. This is new this year and if you have questions on this filing requirement check this FAQ sheet that was sent to our clients with rentals.
The IRS has increased the penalties for failure to file a 1099. If you made or received a payment during the calendar year as a small business or self-employed (individual), you are most likely required to file an information return to the IRS. Please click in the following link or contact our office if you think you may need to file a 1099. Am I required to file a Form 1099?
Affordable Care Act
We must verify on your tax return that you and your family had health insurance during 2019. If you purchased insurance through the Marketplace, you should receive a 1095-A. The deadline for the Marketplace to provide this form to you is February 1st. This form needs to be included in the paperwork that you bring to us.
If you purchased insurance directly from an insurance company, you should receive a 1095-B and if your insurance is through your employer, you should receive a 1095-C. These two forms are a new requirement and the deadline for the issuers is not until March 31st. We can file your return without this form so don't delay bringing in your organizer because you are waiting for this form.
We must verify on your tax return that you and your family had health insurance during 2019. If you purchased insurance through the Marketplace, you should receive a 1095-A. The deadline for the Marketplace to provide this form to you is February 1st. This form needs to be included in the paperwork that you bring to us.
If you purchased insurance directly from an insurance company, you should receive a 1095-B and if your insurance is through your employer, you should receive a 1095-C. These two forms are a new requirement and the deadline for the issuers is not until March 31st. We can file your return without this form so don't delay bringing in your organizer because you are waiting for this form.
Foreign Bank & Financial Accounts (FBAR)
FBAR refers to Form 114, Report of Foreign Bank and Financial Accounts, that must be filed with the Financial Crimes Enforcement Network (FinCEN), which is a bureau of the Treasury Department. The form must be filed electronically and is only available online through the BSA E-Filing System website.
Who needs to file an FBAR? Taxpayers with an interest in, or signature or other authority over, foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2018 generally must file. The FBAR filing requirement is not part of filing a tax return. The FBAR Form 114 is filed separately and directly with FinCEN.
For more on filing requirements www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-accounts-fbar
FBAR refers to Form 114, Report of Foreign Bank and Financial Accounts, that must be filed with the Financial Crimes Enforcement Network (FinCEN), which is a bureau of the Treasury Department. The form must be filed electronically and is only available online through the BSA E-Filing System website.
Who needs to file an FBAR? Taxpayers with an interest in, or signature or other authority over, foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2018 generally must file. The FBAR filing requirement is not part of filing a tax return. The FBAR Form 114 is filed separately and directly with FinCEN.
For more on filing requirements www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-accounts-fbar
Does the IRS consider your business a hobby?
Do you have a business that has not made a profit in at least 3 out of the last 5 years? If you do, the IRS may consider this a hobby and you can not deduct expenses that exceed your income.
Here is a list of factors that the IRS uses to determine profit motive
1. The manner in which the taxpayer carried on the activity.
2. The expertise of the taxpayer or his or her advisors.
3. The time and effort expended by the taxpayer in carrying on the activity.
4. The expectation that the assets used in the activity may appreciate in value.
5. The success of the taxpayer in carrying on other similar or dissimilar activities.
6. The taxpayer's history of income or loss with respect to the activity.
7. The amount of occasional profits, if any, which are earned.
8. The financial status of the taxpayer.
9. Elements of personal pleasure or recreation.
Is this business for real?
Hobby or business?
Do you have a business that has not made a profit in at least 3 out of the last 5 years? If you do, the IRS may consider this a hobby and you can not deduct expenses that exceed your income.
Here is a list of factors that the IRS uses to determine profit motive
1. The manner in which the taxpayer carried on the activity.
2. The expertise of the taxpayer or his or her advisors.
3. The time and effort expended by the taxpayer in carrying on the activity.
4. The expectation that the assets used in the activity may appreciate in value.
5. The success of the taxpayer in carrying on other similar or dissimilar activities.
6. The taxpayer's history of income or loss with respect to the activity.
7. The amount of occasional profits, if any, which are earned.
8. The financial status of the taxpayer.
9. Elements of personal pleasure or recreation.
Is this business for real?
Hobby or business?