The IRS has issued final regulations on charitable contributions and state and local tax (SALT) credits. The regs require taxpayers to reduce their charitable contribution deductions by the amount of any SALT credits they receive or expect to receive in return. This allows some taxpayers to deduct certain payments as taxes. The IRS also has issued a safe harbor that allows individuals, in some circumstances, to deduct disallowed charitable contributions as state or local taxes. Treasury Decision 9864, available in the June 11 Federal Register, finalizes proposed regs published August 27, 2018.
The U.S. House of Representatives passed the Taxpayer First Act, a bill to reform the IRS. The version of the bill that was passed on June 10 eliminated a controversial provision that would have codified a program in which the IRS partnered with tax preparation companies. As its principal goal, the bill seeks to improve taxpayer interactions with the IRS, including improving cybersecurity and identity protection. With bipartisan support, the proposed law is expected to be taken up by the Senate shortly. After hearing of the House passage, Senate Finance Committee Chairman Charles Grassley (R-IA) stated that the bill “should pass in the Senate without delay.”
Planning your wedding? The IRS reminds you that it’s not all about cake and gifts. You’ll also be filing your first tax return as a married couple. To help you take the plunge, the IRS lists simple steps to follow. For example, check your withholding. You may need to have more (or less) tax taken out, so you should submit a new Form W-4 to your employer. If the marriage results in a name change, you’ll need to inform the Social Security Administration. For address changes, let the IRS and the U.S. Postal Service know. You’ll also need to decide whether to file joint or separate tax returns. For more details on these important issues, click here.
The IRS has issued final regulations on certain transfers of property to RICs and REITs. They impose a corporate-level tax on some transactions, including those involving regulated investment companies (RICs) in which property of a C corporation becomes the property of a real estate investment trust (REIT). The regulations affect the repeal of the General Utilities doctrine by the Tax Reform Act of 1986. They also prevent abuse of the Protecting Americans from Tax Hikes Act of 2015.
The IRS has made a correction that affects some farmers and fishermen. It concerns taxpayers who claim the Section 199A qualified business income deduction and compute their income taxes via the farmer-fisherman income averaging method, using Schedule J (Form 1040). Under the revised instructions, these taxpayers should figure the amount that may be entered on Line 2a of Schedule J by taking into account amounts on Form 1040, Line 9, “Qualified Business Income Deduction” (but only to the extent that the deduction is attributable to any farming or fishing business). See the complete instructions.
The IRS has issued a draft of its redesign of Form W-4, “Employee’s Withholding Allowance Certificate.” The revised form implements the changes affecting taxpayer withholding made by the Tax Cuts and Jobs Act. The form no longer uses the concept of withholding allowances tied to the personal exemption. Instead, it’s divided into five steps. All employees must complete Step 1 (where the employee will enter personal information, such as his or her filing status) and Step 5 (where the employee will sign the form). Steps 2 through 4 are optional. Beginning in 2020, all employers must use the new form for new employees. (FAQs on the early release of the 2020 Form W-4)