(BPT) - Tax reform represents the largest change to the tax code in the last 30 years, impacting virtually everyone, but carrying special considerations for small business owners, the self-employed and employees with unreimbursed business expenses.
It will take taxpayers time to untangle the full impact of reform, and as the 2019 tax season takes off, taxpayers should be aware of the unique challenges it’s likely to present, regardless of where they fall in the spectrum.
According to the tax experts at Block Advisors, the group most at risk of owing when they file are those employees who deducted unreimbursed business expenses for 2017. Tax reform eliminated the deduction for unreimbursed employee business expenses.
Ramon Vasquez is a Block Advisors master tax advisor with over 12 years of both public and private sector experience, working in investments, real estate, small business, tax planning and more. He said that though all individual tax situations are unique, there are some things people can do now to aid in filing an accurate return to get their maximum refund.
“How tax reform impacts you depends entirely on your specific circumstances, so it’s important to look at your unique situation to see what you should expect when you file,” Vasquez said. “Somebody could still benefit from tax reform even though they lose their unreimbursed business expense deduction, but you may also want to talk to your employer about switching to an accountable plan, which allows employers to reimburse expenses to their employee tax-free.”
Beyond those with unreimbursed employee business expenses, there are other individuals for whom tax reform may require some additional untangling.
Small business owners and the self-employed also need to approach this tax season with a particular awareness.
“Some of the largest changes in tax reform apply to businesses, which can include some landlords,” Vasquez said. “For example, self-employed individuals, including those who have income from partnership and S corporations, may be able to deduct up to 20 percent of their qualified business income.”
As has been the case with tax season in the past, homeowners have special considerations. But this year marks a change for them, too, primarily through changes in itemized deductions. According to the tax experts at Block Advisors, tax reform changes the itemized deductions some homeowners can claim.
“For example, tax reform limits the home mortgage interest deduction on new home mortgages to interest paid on up to $750,000 of acquisition debt. It also limits the deduction for home equity debt,” Vasquez said of changes in deductions. “You’ll also be limited to deducting a maximum of $10,000 ($5,000 if married filing separately) in personal property taxes, real estate taxes, plus income taxes or sales taxes combined.”
One of the most important parts of conquering tax season 2019 is an acute awareness of one’s individual tax situation. As every taxpayer is different, untangling the year’s taxes is going to require additional planning to help taxpayers avoid surprises when it comes time to file their tax return.
A major part of avoiding any surprises this year has to do with making appropriate updates through your employer.
“If you don’t like what happened with your refund this year, you can make sure it doesn’t happen again next year by updating your withholding with your employer,” Vasquez said. “Come in to an office to have your Block Advisors tax advisor provide W-4 planning when you file your 2018 tax return. Not only do we offer year-round tax consulting, we provide year-to-year tax return planning.”
Taxpayers with layered tax situations can head to blockadvisors.com to get matched with their personal tax advisor.