Beware of the new tax laws
Q. I keep hearing about tax changes for 2018. Do any affect me?
A. Yes. Effective Jan. 1, there are many changes. The 2018 per diem rate from Jan. 1 through Sept. 30 was $63 per day in the continental U.S. From Oct. 1 through Dec. 31 the per diem rate increased to $66 per day in the continental U.S. For 2019, the per diem rate remains at $66 per day in the continental United States and is still 80 percent deductible for DOT self-employed contractors and business owners only.
Please note that effective Jan. 1, 2018, the new tax law has eliminated the deduction for unreimbursed business expenses that exceed 2 percent of adjusted gross income. That means company drivers receiving a W-2 will no longer be able to claim per diem or any other out-of-pocket expense such as laundry, telephone, gloves and safety goggles.
Another big change may include a 20 percent deduction for incomes from certain type of “pass-through” entities (partnerships, S corporations, sole proprietorships). A taxpayer may elect to expense the cost of any Section 179 property and deduct it in the year the property is placed in service. The new law increased the maximum deduction from $500,000 to $1 million. It also increased the phase-out threshold from $2 million to $2.5 million. For taxable years beginning after 2018, these amounts of $1 million and $2.5 million will be adjusted for inflation.
Q. I’m going to be very busy this coming February and March. I would like you to list what I would need for my income tax preparation.
A. Listed below are items you will need for your income tax preparation. Most tax preparers should have an income tax organizer, which lists what would be needed. You can download ours at PBSTax.com.
Items you should receive by early February: (Required to be sent by Jan. 31).
- Form W-2s from employers.
- Form 1099s from all companies and/or individuals you have done work for – brokers, motor carriers, independent businesses, etc., weekly or monthly settlement, if we are summarizing.
- Form 1099s or end-of-year statements from banks or brokers for interest and dividend income, stock sales, mutual funds, Social Security, and mortgage interest statements.
- Schedule K1 if you are involved in any partnerships or S-corporations.
- Form W-2P or Form 1099R for pension and annuity income along with 401(k) and IRA distributions.
- Form 1099s and year-end statements for unemployment compensation, Social Security income and state income tax refund.
- Form 1098s for mortgage interest paid.
- Nights away from home to compute the per diem deduction.
- Company drivers need to gather their W-2s.
- Determine if you have or are going to make any contributions to a SEP, Keogh and/or 401(k) plan. You have until the due date of the returns including extensions.
- Simple IRAs, traditional IRAs and Roth IRAs must be established by the original tax filing deadline of April 15 (without extensions).
- You must fund and/or contribute to your simple IRAs, traditional IRAs and Roth IRAs by the original tax filing deadline of April 15 (without extensions).
- Indicate any estimated taxes paid with corresponding dates.
Here are a few other things you’ll need:
- Contracts for the purchase and/or sale of equipment.
- Escrow statements for the purchase, sale or refinance of property.
- Confirmations from charities for donations in excess of $250.
Remember, if you have employees or independent contractors, you are also required to send out your W-2s and 1099s by Jan. 31 as well. This includes self-employed individuals who have hired their children to do work for their business. You must issue W-2s to your children to get the deduction. LL
This article has been presented by PBS Tax and Bookkeeping Service, a company that has been providing income tax and bookkeeping services to the trucking industry for more than a quarter century. If you would like further information, please contact us at 800-697-5153. Visit our website at PBSTax.com.
Everyone’s financial situation is different. This article does not give and is not intended to give specific accounting and/or tax advice. Please consult with your own tax or accounting professional.