Back in the Old Sub

Every time I try to get out, they pull me back in .... and under.

Semi-retired or not, this is the time of year I put in the most hours at work.  And I find even with the time I am putting in, I'm still fogging over and finding it difficult to concentrate.  I operate in a fog most of the time.  Fiction writing has disappeared, and I can only pray that it comes back after April 15th.

There has been a lot of talk about what effect the tax changes passed in December 2017 had on taxpayers.

My sample is not huge.  Still, I've seen more than most of you.  And I'll tell you this -

It's a mixed bag.

Some stayed about the same.  Some were worse off.  A few did better.

The biggest things I've seen?

1)  Many people who use to itemize, don't pass the new threshold now.  People are still submitting their itemized deductions, but a good number no longer cross the threshold where it makes sense to use them.  For me personally, until the tax law changes again, it makes no sense to even keep track of things like mortgage deduction, charitable contributions, property taxes and such.  I'm not sure how many understand that those things may not be useful anymore.

2) The loss of personal exemptions mute some of the benefit of the increase in the standard deduction.  Many don't understand that the parade of dependents does not help to the degree that it used to, especially if those dependents are over the age of 16.  There is a $500 credit for dependents over 16.  On the other hand, the child dependent credit for 16 and under is now up to $2,000 so those with children may have seen a drop in the bottom line owed.

3) The Trump administration wanted to upfront the potential tax reduction impact of their plan, so they adjusted the tax withholding tables for wage-based employees in a way that most increased their paychecks.  Even so, the adjustment was too small for most taxpayers to notice, but they did notice it's other effect - some found that although their total tax responsibility might be slightly lower, their refund was reduced from what they were used to, or they actually had to pay in.  Those who claimed a plethora of dependents on their W-4 were in the worse shape.

4)  For those who usually do qualify for itemized deductions, even with the higher threshold, some may have found some of their deduction categories capped.  The amount you can take for different taxes - property, state, local, etc., - is capped at $10,000.  That's high by middle-class standards, but I have seen some returns limited by it.  One person had an unusually high tax year in 2017, and with their income more routine in 2018, are unable to take the full deduction on the large amount of state taxes they had to pay the prior year.

5)  If you are a wage slave and paid for some of your work expenses yourself  - too bad, so sad.  That deduction is gone.  On the other hand....

6)  If you are self-employed or get your income primarily through a partnership or 1120S corporation -  woohoo!  There is a new deduction that takes off 20% of your NET income!  I had one taxpayer whose income was mainly through self-employment (Schedule C) and 1120S (a type of corporation where the income flows through to individual returns), and with similar income compared to the prior year, saw their total tax bill go down by about ... 20%!

All of this relates to the age-old question - WHAT ABOUT ME?

Sorry to interrupt that thought, but I have to ask - WHAT ABOUT THE COUNTRY?

The tax code changes reduce the amount of incoming tax revenues by an ungodly huge number, thereby massively increasing the nation's deficit spending.  The benefits are focused almost exclusively on the wealthiest of our taxpayers (not something I see much of in the returns I do - we have some well-off people, but I don't prepare anyone's return that is in this category), further super-charging the income gap. 

The economy is good (albeit beginning to slow), but the long term prognosis of this kind of concentration of wealth is not promising.  There is already pressure to make up the difference by further cutting programs that help the working poor and the middle class. 

There is a lot more I could say in this regard (and those who faithfully follow my blog probably have already read it), but the old clock on the wall is telling me it is time to hoof it to work once again.

File away, America!  We CPAs will do the best we can to help you through it!

And after that, I can return to the wonderful world of fiction!