Clients with dependent children can be reassured that the increased child tax credit can go a long way in offsetting lost deductions.
As CPA tax preparers ready their practices for the 2020 filing season, they are making the usual adjustments to staff schedules, training, and other necessary measures. They might be facing this tax season with greater assurance than last year, when they first began to apply myriad tax law changes under the legislation known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97. While many unclear points have been resolved by guidance in the past year, many more remain, and applying the new guidance may in some cases raise previously unanticipated questions. The previous tax season involved getting acquainted with the TCJA. This year will no doubt entail applying that knowledge with perhaps greater efficiency and more thorough insight into all its repercussions, CPAs said.
"I expect tax preparation season 2020 to involve learning about new regulations that have been issued, refining our knowledge of the tax law changes, and identifying additional planning opportunities based on our understanding of the new tax law," said Alex Masciantonio, CPA, a senior tax manager with Gunnip & Co. LLP in Wilmington, Del.
A big unknown, however, is how well the IRS and tax software providers will provide the administrative and practical support and software design needed to make this tax season as trouble-free as possible. Roger Yule, CPA, rates the last tax preparation season as the worst ever in his 34 years as a tax practitioner in terms of difficulty and disruption, primarily due to fresh complexities in his field of international tax compliance.
"I had hoped a year ago that it would be better," said Yule, a tax services manager at Wipfli LLP in Tinley Park, Ill., near Chicago. After all, he said, the 2018 preparation season had collided with the Sec. 965(a) Subpart F deferred foreign income inclusion ("transition tax") that had to be quickly calculated for the last tax year beginning before 2018, and the first tax installment paid.
But not only did the following 2019 filing season thrust preparers into some unfamiliar territory, it gave them less time to traverse it, with the IRS out of commission until the start of the season because of the longest government shutdown in U.S. history. While the prospects for another shutdown in late 2019 and early 2020 are unclear as of this writing, it is not out of the realm of possibility. Regardless, a longer-term trend toward a later beginning of tax season for other reasons has compressed the work time available up to April 15, while returns generally have become more complex, Yule noted.
In 2019, however, there were relatively few new tax law changes, while the IRS brought out guidance in a number of areas.
"So, hopefully, the IRS will be working on updating and correcting things," Yule said. Much will also depend on how well the tax software providers incorporate the TCJA changes into forms and calculations, he said, adding that many lapses in that regard were evident in preparing 2018 returns. Whether and how state income tax laws continue to conform to TCJA changes is an ongoing area of potential uncertainty, and handling carryovers of excess amounts under TCJA provisions makes the work of adaptation far from complete, as well.
Thus, practitioners are in many cases reviewing those points for some of the more common issues they're likely to encounter. What follows is a short summary of a select few, noting especially where guidance has been issued in the past 12 months.
INDIVIDUAL RETURN ISSUES
SALT limitation: The new provision of Sec. 164(b)(6)...