However, it’s important also be aware of what is being proposed and what could become law. So I want to use this blog to share information about some of the proposals under the Trump Tax Reform Plan.
The stated objective for Trump’s Tax Reform Plan is to cut the income tax for middle-class workers and simplify and reduce business taxes.
For Individual Tax Returns: The number of tax brackets would be reduced from 7 to 3, with the lowest increasing from 10 to 12% and the highest of 39.6 decreased to 33%.
Individual Income Tax Rates (MFJ):
Less than $75,000: 12%
More than $75,000 but less than $225,000: 25%
More than $225,000: 33%
*Brackets for single filers are ½ of these amounts
The standard deduction for Married Filing Joint would be increased from $12,600 to $30,000; Single filers would be allowed $15,000. However, the personal exemptions (which are currently $4,050 per person/dependent) would be removed, and the Head of Household (HOH) filing status would be eliminated.
Childcare costs could be claimed by stay-at-home parents and grandparents for children under age 13. Also, Dependent Care Savings Accounts (CSAs) for the benefit of specific individuals, including unborn children, could be established with total annual contributions up to $2,000. The Alternative Minimum Tax (AMT) and Net Investment Income Tax (NIIT) would both be eliminated. Capital gains, charged on investment income, would remain the same with a maximum tax rate of 20%.
For Business Owners:
For businesses, the focus will be cutting taxes, from the highest current rate of 35% to a corporate tax rate of 15% and eliminating most business deductions and AMT. This reduction will make the US more competitive as compared to other countries’ tax rates.
Flow through entities, like S corps, partnerships and sole proprietorships, for which profit “flows through” to the individual’s tax return and is normally taxed at the individual’s income tax rate would instead be taxed at the 15% tax rate.
Current Tax Season:
For the current tax season, there is an automatic delay of processing of refunds until mid-February for returns which include specific tax credits which have been found to have significant fraudulent activity – these are the Earned Income Credit (EIC) and Additional Child Tax Credit (ACTC). Refunds for those returns won’t arrive in bank accounts until the week of Feb 27th if direct deposit requested. Easiest way to check on your refund is to use the “Where’s My Refund” link on the www.IRS.gov website or use their app IRS2Go app.
New State Requirements: The State of IL in efforts to minimize identity theft, are now requiring Driver’s License or State ID information for e-filed returns this year. The State is also delaying all refunds on returns until Mar 1st.
Shift in Corp tax filing deadlines: Filing deadline for S Corp returns remain Mar 15th. However, Partnership returns are now moved up to Mar 15th filing date and C Corp Returns are pushed out to Apr 18th.
Judy Stafford is the Owner of Padgett Business Services of DuPage who works exclusively with small business owners, like herself, to enable them to focus on growing their business by relieving the burdens of financial reporting and tax compliance and acting as a trusted advisor. Our services include financial reporting, tax preparation, government compliance, complete payroll solutions, and business consulting.
Judy Stafford, MBA, EA
ENROLLED TO PRACTICE BEFORE THE IRS
Padgett Business Services of DuPage
1212 S. Naper Blvd., Suite 119-229
Naperville, IL 60540-7349
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Linked In: https://www.linkedin.com/in/judystafford/