Collectively speaking, the US government has an eloquence of lawyers, and the IRS is no exception. Lately those hard workers have been issuing a rash of regulations. Have you been keeping up?
According to the Internal Revenue Service Strategic Plan for 2018-2022, during fiscal year 2017, the IRS spent 35 cents for each $1 in collections, processed 246 million federal tax returns and forms, collected $3.4 trillion in gross taxes and $56.9 billion in enforcement revenue.
One of the challenges identified by the strategic plan is that 27% of the agency’s workforce will be eligible to retire by the end of fiscal year 2018.
Section 11042 of the Tax Cuts and Jobs Act, passed in December 2017, limits an individual’s itemized deduction for state and local taxes paid during the calendar year. Before the law was enacted, taxpayers who itemized could take a federal income tax deduction for all state and local income taxes (or sales taxes) as well as property taxes paid during the calendar year.
In response to this new limitation, some state legislatures are considering or have adopted laws that would allow taxpayers to make transfers to funds controlled by state or local governments in exchange for credits against the state or local taxes. The proposals would allow taxpayers to characterize the transfers as fully deductible charitable contributions for federal income tax purposes, while using the same transfers to satisfy state or local tax liabilities.
In Notice 2018-54, the IRS said it intends to propose regulations addressing these laws.
The Tax Cuts and Jobs Act also eliminated the federal income tax deduction for all miscellaneous itemized deductions subject to the 2% of adjusted gross income floor for tax years 2018 through 2025. These deductions include unreimbursed employee expenses such as uniforms, union dues, and the deduction for business-related meals, entertainment and travel.
Per IRS Notice 2018-42, the change means taxpayers can’t use the standard mileage rate to claim an itemized deduction for unreimbursed employee travel expenses.
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Employees aged 25 or younger make up less than half of 1% of the workforce.
Section 11042 of The Tax Cuts and Jobs Act, limits an individual’s deduction under section 164 of the internal revenue code for the aggregate amount of state and local taxes paid during the calendar year to $10,000 ($5,000 in the case of a married individual filing a separate return).
State and local tax payments in excess of those amounts are not deductible.
This new limitation applies to taxable years beginning after December 31, 2017, and before January 1, 2026.
Deductions for expenses that are deductible in determining adjusted gross income are not suspended.
Members of a reserve component of the US military, state or local government officials paid on a fee basis, and certain performing artists are entitled to deduct unreimbursed employee travel expenses as an adjustment to total income on line 24 of Form 1040 (2017), not as an itemized deduction on line 21 of Schedule A of Form 1040 (2017), and therefore may continue to use the business standard mileage rate.
Per IRS Notice 2018-03, the standard mileage rates for the use of a car, van, pickup or panel truck for 2018 are
54.5 cents for every mile of business travel driven, a one cent increase from 2017.
18 cents per mile driven for medical purposes, a one cent increase from 2017.
14 cents per mile driven in service of charitable organizations, which is set by statute and remains unchanged.