Key forms for tax-exempt organizations get a makeover. Most tax-exempt organizations file Form 990 (Return of Organization Exempt from Income Tax) or the shorter version, Form 990-EZ. Revised versions of the forms now reflect changes in tax law brought by the Tax Cuts and Jobs Act, as well as an accounting change made by the Financial Accounting Standards Board. Form changes include the addition of an excise tax on certain highly compensated employees. We can help you navigate the new Form 990, as well as the instructions.


Penalty relief is ahead for some taxpayers. The IRS announced it will waive the estimated tax penalty for taxpayers who inadvertently underpaid their 2018 federal taxes because of changes brought on by the Tax Cuts and Jobs Act. Generally, to avoid a penalty, taxpayers must pay 90% of their tax bill through withholding, estimated payments or both. The penalty will now be waived for those who paid at least 85% of their 2018 taxes due. Contact us for help determining your tax liability. Read more about IRS Notice 2019-11.


The highly anticipated final regulations on the Sec. 965 “transition tax” have been issued by the IRS. In general, the law now requires U.S. shareholders to pay a transition tax on the untaxed foreign earnings of certain specified foreign corporations as if the earnings had been repatriated to the United States. The final regs retain the basic approach and structure of the proposed regs published last August, with certain revisions. Contact us if you have questions about your situation. For more information about Sec. 965, visit https://www.irs.gov/businesses/section-965-transition-tax 


Sen. Ron Wyden (D-OR) has queried the IRS on penalty relief for underwithholding due to the Tax Cuts and Jobs Act (TCJA). Wyden is concerned that, due to the many TCJA changes, millions of taxpayers may have been underwithheld this past year and will face unexpected tax liability and penalties. Wyden noted that, due to the quick nature of the law’s implementation, the Treasury had to “jury-rig the current withholding allowance instead of properly revising the Form W-4 so that employees could update the number of allowances they claimed with their employers.”


Rep. Kevin Brady (R-TX), the outgoing Chairman of the House Ways and Means Committee, has released the “Tax Technical and Clerical Corrections Act.” It’s a discussion draft of technical corrections to the Tax Cuts and Jobs Act (TCJA) and other recent legislation. Among other provisions are corrections to the applicable recovery period for qualified improvement property and clarifications with respect to the new qualified business income deduction. However, congressional Democrats, now in majority in the U.S. House, have shown limited interest in making TCJA fixes.


The IRS says the qualified disability trust exemption isn’t subject to a phaseout. For tax years beginning after 12/31/17 and before 1/1/26, when the personal exemption amount is reduced to zero under the Tax Cuts and Jobs Act, the amount of a qualified disability trust’s exemption is $4,150, adjusted for inflation for tax years after 2019. The IRS has now clarified that, for 2018, the $4,150 exemption isn’t subject to a phaseout, reversing its earlier position. Taxpayers are instructed to not use the exemption worksheet in the 2018 Form 1041-ES instructions.


Avoid tax time surprises with an estimated payment, advises the IRS. The Tax Cuts and Jobs Act brought many changes, including lower tax rates for most people. While the IRS expects that most taxpayers will still get refunds, a larger-than-usual number of people will owe taxes and possibly penalties. At greatest risk are two-wage-earner households, employees with nonwage sources of income and those with complex tax situations. You may be able to avoid shortfalls by making an estimated payment for 2018 by the 1/15/19 deadline. Contact us for help.

LBMC tax tips are provided as an informational and educational service for clients and friends of the firm. The communication is high-level and should not be considered as legal or tax advice to take any specific action. Individuals should consult with their personal tax or legal advisors before making any tax or legal-related decisions. In addition, the information and data presented are based on sources believed to be reliable, but we do not guarantee their accuracy or completeness. The information is current as of the date indicated and is subject to change without notice.