Income tax changes you should know before you file

Investigations

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KNOXVILLE, Tenn. (WATE) — It’s that time of year again – the Internal Revenue Service is now accepting and processing income tax returns.

It’s now the second year of President Trump’s tax plan and there are some tweaks.

WATE 6 On Your Side’s Don Dare sat down with a tax preparer to examine some of the changes.

As part of the Bipartisan Budget Act of 2018, new for 2019 – seniors 65+ will have their own tax return option.

Last year, taxpayers had six new supplemental schedules that would build on the Form 1040.

But for 2019 tax returns, those schedules have been redesigned and merged into three schedules that will hopefully streamline the filing process.

Income tax specialist Mark Curran is already busy preparing tax returns at his office in Halls. He says there are some changes to note.

Simpler Form

One thing you’ll immediately notice this year, the 1040 Form has gotten easier to navigate. You are going to sign your tax form on the second page instead of the first page. He says it’s better laid out than the 2018 version.

“It’s a simplified form, they went back to previous era versions,” he said. “I do like what Congress is trying to do in simplifying the tax code. They’re basically trying to get away from itemized deductions and have the majority of Americans do standard deductions.”

Number of schedules

Another change, there are three numbered schedules for 2019 — half as many as there were for 2018. Basically, some were combined to fit on a single page.

“It’s a brand new tax form that the government has come out with,” Curran said. “‘SR’ stands for Senior. If people were born before Jan. 2, 1955, they are eligible to file this even more simplified form.”

Penalties under the Affordable Care Act

Also, previous penalties under the Affordable Care Act are no longer going to be applied to this latest return.

“However, people do need to know if you have your health insurance through the Health Care Marketplace you have to apply that to your tax professional and they still have to reconcile your premiums on the tax return,” Curran said.

Alimony payments

There are some changes to what you can and cannot deduct from your taxes.

If you got divorced after 2018 and pay alimony, you can no longer deduct alimony payments. Ex-spouses who receive alimony are no longer required to claim it as income.

Extenders for 2018 tax return

Congress recently passed the Extender Bill and Secure Act of 2019.

“So, taxpayers had already filed their tax return based on information they could not deduct certain expenses. Congress retroactively approved those deductions,” Curran said. “Now the taxpayer would need to go back and amend their 2018 tax return in order to take advantage of those extenders.”

Curran expects lots of people will want to file early to get their return as quickly as possible. What you need to remember is to take time for preparation.

“Make sure you have all your documents and ducks in a row,” he said. “And, the sooner you file the better. Especially for earned income credit taxpayers or child tax credit payers because the IRS is holding onto the refunds longer now.”

But wait, there’s more.

Virtual currency

A virtual currency question on this year’s tax form is also new.

If you sell or exchange virtual currency, use it to pay for goods and services, or hold it as an investment, you could have a tax liability as a result.

So, it should come as no surprise that the IRS wants to know about virtual currency transactions.

The IRS says taxpayers who made transactions involving virtual currency will need to file a Schedule 1 for 2019 with their tax return.

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