The 20% qualified business income(QBI) deduction, for those individuals who qualify, is claimed on line 9 of the 1040 for 2018. There isn’t a form for 2018 but starting in 2019 there will be a new form to fill out when you file your tax return to claim the 20% write-off deduction.
This break is given to self-employed as well as owners of pass-through entities. Limited Liability Companies(LLC), partnerships and S corporations are eligible for this deduction. You will receive a K-1 form if you have ownership in any of these pass-through entities which will report your share of the firms QBI.
QBI is your share of income after deductions from a trade or business. These deductions don’t include wages, dividends, capital gains or losses, non-business interest income, compensation from an S corporation, or guaranteed payments from partnerships.
The IRS is considering adjusting the 250-hour test for schedule E rental income. They may lower the safe-harbor rule threshold to 100-hours. Record keeping is extremely important. Starting in 2019 you’re required to keep records that detail the hours, dates, a description of the services, and who performed them. When the rule is finalized, it will be included in future monthly news articles. Stay tuned.
Due to the tax law changes your refund may be less than you were hoping for or you may have owed money to the IRS. In either case, you may want to consider changing your withholding amount. On its website, the IRS has a withholding calculator that helps you determine how much tax you need to have your employer withhold from your paycheck. Go to www.irs.gov/individuals/irs-withholding-calculator to help you figure how many allowances you should claim when you submit your new W-4 form to your employer.
If you need to amend your return or file an extension you have to prove you sent these in by the deadline. It is best to use Registered or Certified mail, or you can use an agency-approved private delivery service. These are the three ways you can prove that you sent the forms timely that the IRS will accept.
The IRS is still concerned about significantly underreported tip income. They will be doing a national survey of consumer tipping practices at businesses where tipping is prevalent. The IRS first started this in 2015, and they’re extending it.
The new tax laws affect alimony payment rules. Alimony paid for divorce or separation agreements after 2018 are no longer deductible. The IRS will be checking closely to make sure taxpayers are adhering to these changes. Taxpayers will be required to put the date of the divorce or separation agreement on Schedule 1 of the 1040 starting on 2019 tax returns. They are also adding a filter to check taxpayer alimony deduction history to see if the taxpayer took an alimony deduction in 2018.