The Tax Cuts and Jobs Act (TCJA) was touted as tax reform that would shorten tax forms and increase tax savings for most Americans. Whether or not these promises will hold true is not yet known, but here is what we know so far:
- Shortened form: One of the promises was a shortened 1040 income tax form. More specifically, the government stated new form would be “the size of a postcard.” The Internal Revenue Service (IRS) recently released a draft copy of the form. The results? A form that is close to, but still bigger, than a postcard. Critics also note the form is two sided, while post cards are not. Experts caution that although it is smaller, the size of the form is deceiving. Although it requires less information it may be more complex than previous forms as it requires the use of extensive schedules to gather the information needed to fill in the provided blanks. The complexity could lead to tax controversies in the future.
- New format: In the past, many taxpayers simply copied information from previous tax years over to their most recent tax filings. Taxpayers will not be able to use their 2017 return as a model for their 2018 tax filings. The tax forms are too different to provide much guidance in the coming tax year.
- Surprise tax bill: If you have not reviewed your withholding status, take this opportunity to do so. Withholding tables changed in February. A failure to withhold the proper amount can result in an unexpected tax bill. The IRS can apply additional penalties in the event the amount withheld falls below a certain threshold.
Additional information about the impact of this law will become apparent as we approach tax season.