“It’s really important to do advanced preparation this year–starting in the Fall–to provide enough time to evaluate, calculate, and make adjustments in accordance with the new tax code. There are new ways to minimize your taxes, and as a result, some complex calculations may be necessary,” says Shellee Callahan, principal of K·Coe Isom’s tax team. She adds, “Many timelines have shifted, some filing dates will be hard to meet, and extensions will be needed for most filers.”
How Tax Changes Impact 1040 FilingsThere are significant tax reductions available at the Form 1040 level. Some of these reductions do not require anything other than reporting them correctly, while some will require additional reporting to qualify, and others may be significantly increased if you make changes in how your business operates.
- Additional reporting requirements apply to all flow-through entities and individuals.
- The basic 1040 has changed, as have all of the supporting schedules for anyone that owns a business, rents, property, etc.
- Individuals with commonly-owned pass-throughs/businesses will need a determination made (prior to filing returns) regarding whether an aggregation election is needed (this may require complex calculations to accurately identify whether to aggregate all, some, or none).
- Due to delays at the IRS in finalizing and issuing tax forms and instructions, updated tax filing software is expected to be released much later than in past years, and the timeline for preparation and filing returns will likely be delayed as late as early March.
Fall Prep and Action Items Needed
- Initiate any necessary tax planning in the Fall: planning should be discussed with your accountant well in advance of preparing returns to provide time to capture advantages and understand the impact of the new tax code. (As returns could be more complex under the new tax code, they may require additional calculations and time to take advantage of new tax opportunities and how they can be applied to minimize taxes.)
- Farmers should consider converting from a 3/1 date to a 4/15 filing date: due to the expected delay of forms this year, if you are a farmer and normally file by the 3/1 due date, you may want to file 4/15 or later. (Planning will be necessary in the Fall, and payments for Q4 estimates will be due by January 15, 2019.)
- File an extension: due to the later release of tax filing software, an extension may be necessary for virtually all business owners. If all of your information can not be obtained by March 20, 2019, an extension will likely be necessary.