With the 2018 tax deadline rapidly approaching, taxpayers will face fraudulent attempts by scam artists using the April 15 deadline as a way to gain financial and personal information. These attempts are made through a wide range of elaborate schemes via a number of tactics - especially phone scams.
In 2018, the federal tax withholding tables changed because of lower individual tax rates in the Tax Cuts and Jobs Act. As a result, individuals received larger paychecks because of the lower rates. A downfall of this was individuals potentially not withholding enough taxes to cover their tax bill in April and being subject to underpayment penalties.
As tax season rages on, cyber criminals are targeting taxpayers with new scams. After a 60 percent jump in so-called phishing scams in 2018, the IRS is warning us to be extra vigilant this year. Hackers are using the advancements in technology to target taxpayers year-round but tax season is prime phishing season.
The Tax Cuts and Jobs Act is the biggest tax reform in 30 years and still a very new concept for Congress, the IRS and other regulatory bodies. The analysis and interpretations of each of the different areas of the new legislation are very much still evolving. Some of these areas are extremely complex.
On Oct. 4, 2018, New Jersey adopted several changes to the New Jersey Corporation Business Tax including requiring combined reporting for tax years ending on and after July 31, 2019. This requires companies that have common ownership and are engaged in a unitary business to file a combined New Jersey return if at least one of the entities is subject to New Jersey Corporation Business Tax.
The Tax Cuts and Jobs Act allows for a potential 20 percent tax deduction for qualified business income generated from pass-through entities for tax years beginning after Dec. 31, 2017 (IRC Sec. 199A). The deduction is only applicable to pass-through entities that conduct a trade or business. Therefore, under the original law, it was uncertain if rental real estate entities leasing to third parties would qualify for this deduction.
Qualified Opportunity Zones were established as part of tax reform, and they allow investors to defer or minimize tax on a capital gain by investing in a fund or zone investment. Assuming a taxpayer sells a stock and recognizes a $200,000 gain, investing that gain in a qualified investment within 180 days, coupled with a tax return election, will allow for deferral of the payment of tax until the earlier of the date the zone investment is sold or December 31, 2026.
The IRS is requiring certain verification of identities during phone calls in an attempt to prevent tax fraud. Taxpayers and tax professionals must have the required verification in order for the IRS to answer questions regarding certain tax items. By law, the IRS telephone assistors will only speak with the taxpayer or the taxpayer's legally designated representative.
When clients ask if the Tax Cuts and Jobs Act (TCJA) means tax simplification, I remind them of the three fundamental paradigms of taxation: only two things are certain in life – death and taxes; the correct answer to every tax question is “it depends”; and there is no such thing as tax simplification. This holds true in the new tax landscape, the tax reform will not result in simplification of tax law. The new law has brought meaningful changes to the tax code, but with that comes the following added complexities.
The Albany Business Review hosted six experts to discuss changes to tax laws and their impact on individuals and businesses. Partner Patrick Diggin participated in this discussion on tax reform.
Wednesday, April 24, 2019 | 7:30 AM – 9:30 AM EDT | The Hartford Club