Tax Reform Highlights for Individuals Richard Furlong, Jr. Senior Stakeholder Liaison October 26, 2018 Main Line Association for Continuing Education

“Tax Cuts and Jobs Act” PL 115-97 “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018” Commonly Known as: “Tax Cuts and Jobs Act”

Overview Revising forms, instructions and publications Updating systems and programming Issuing legal guidance Collaborating with tax partners Providing education and outreach to taxpayers Providing training to IRS employees

Recommend a Paycheck Checkup Some law changes in the Tax Cuts and Jobs Act may affect employee’s withholding. Taxpayers can protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time next year.  Taxpayers can avoid too much withholding and receive more in their paychecks. Taxpayers who make estimated tax payments should also re-estimate their estimated taxes.

Changes to standard deduction and personal exemptions Standard Deduction Amount Increased Single or Married Filing Separately—$12,000 Married Filing Jointly or Qualifying Widow(er)—$24,000 Head of Household—$18,000 Deduction for Personal and Dependent Exemptions Suspended

Changes to itemized deductions Limit on overall itemized deductions suspended Deduction for medical and dental expenses modified Deduction for state and local income, sales and property taxes modified Limit for charitable contributions modified

Changes to itemized deductions Deduction for home mortgage and home equity interest modified New dollar limit on total qualified residence loan balance

Changes to itemized deductions Deduction for casualty and theft losses modified Miscellaneous itemized deductions suspended – includes items formerly subject to the 2% of AGI limitation such as tax return preparations fees, uniforms, union dues, and unreimbursed employee business expenses such as, vehicle expenses, meals, entertainment and travel

Changes to Child Tax Credit Child Tax Credit – increased to $2000 (including up to $1400 in additional child tax credit) per qualifying child New Credit for Other Dependents - up to $500 for dependents who do not qualify for the child tax credit Children must have a SSN to qualify for CTC or ACTC Due Diligence Requirement

Other Tax Reform Changes for Individuals Deduction for moving expenses suspended Alternative minimum tax (AMT) exemption amount increased Repeal of deduction for alimony payments

Other Tax Reform Changes for Individuals Treatment of student loans discharged on account of death or disability modified Repeal of deduction for amounts paid in exchange for college athletic event seating rights Combat zone tax benefits available to Armed Forces members who served in the Sinai Peninsula

Health Care Coverage Reporting Reminder For tax year 2018, the IRS will not consider a return complete and accurate if the taxpayer does not report full-year coverage, claim a coverage exemption, or report a shared responsibility payment on the tax return. HealthCare.gov has health insurance options that are available for taxpayers.

Retirement Plans Recharacterization of a Roth Conversion Plan Loans to an Employee that Leaves Employment Disaster Relief – Retirement Plans

ABLE Accounts and 529 Plans Rollovers from a 529 Plan Saver’s Credit now Available for Contributions Changes for People with Disabilities 529 Plans: K – 12 Education

Tax Reform on IRS.gov IRS.gov/taxreform IRS.gov/getready News Releases & Fact Sheets Tax Reform Tax Tips Frequently Asked Questions YouTube Videos Subscription Services Legal Guidance

IRS.gov/tax-reform

www.IRS.gov/taxreform

Contact Information Richard Furlong, Jr. Senior Stakeholder Liaison 267-941-6343 richard.g.furlong@irs.gov

Richard Furlong, Jr. Senior Stakeholder Liaison Highlights of 2018 Income Tax Changes from a Tax Forms Perspective Richard Furlong, Jr. Senior Stakeholder Liaison October 26, 2018 Main Line Association for Continuing Education

2018 draft tax forms are available at IRS.gov/DraftForms You can go to IRS.gov/DraftForms to download or print available draft tax year 2018 forms, instructions, and publications.

Objectives Awareness of major income tax changes for tax year 2018 Awareness of tax form changes from 2017 to 2018 Awareness of new tax forms for 2018

Form 1040 Deduction for personal exemptions suspended Standard deduction increased ($24,000/$18,000/$12,000) Child tax credit increased; new credit for other dependents New qualified business income deduction Domestic production activities deduction repealed New Section 965 inclusion of deferred foreign income

Schedule A Itemized Deductions Home mortgage interest deduction modified Deduction of private mortgage insurance expired Deduction for state and local taxes limited Overall limit on itemized deductions suspended Miscellaneous itemized deductions suspended

Schedule 8812 Additional Child Tax Credit Child tax credit (CTC) increased to $2,000 per child; additional child tax credit (ACTC) limited to $1,400 per child Children identified by an ITIN no longer qualify for CTC or ACTC Impact of credit for other dependents (ODC) on ACTC calculation--ODC subject to limits first, effectively like a credit that comes before CTC in the ordering rules

Form 2106 Employee Business Expenses Limited to (can only be filed by): Armed forces reservists, Employees with impairment-related work expenses, Employees who received employer reimbursements, Qualified performing artists, and Fee-basis state or local government officials. Form 2106-EZ retired

Form 4684 Casualty and Theft Losses Personal casualty or theft loss only to extent of loss from Federally declared disaster Will have new field for entry of a FEMA code No losses from employee property

Form 6251 Alternative Minimum Tax Increased exemption amounts and phaseout thresholds No adjustment for medical expenses No adjustment for mortgage interest No adjustment for miscellaneous deductions No adjustment for the overall limit on itemized deductions Line for electing large partnership adjustment removed

Form 8829 Business Use of Home New line for “excess” real estate taxes

Form 8867 Due Diligence New due diligence requirement for preparing returns of taxpayer filing as head of household Due diligence requirement for the credit for other (non-child) dependents Penalty amount now $520

Form 8903 Domestic Production Activities Deduction DPAD repealed for tax years beginning after 2017 Taxpayers may still have DPAD for 2018 from fiscal year flow-through entities Reporting may have been moved to a write-in or other deductions line instead of having its own line

Form 8949 Sales and Other Asset Dispositions New code “Z” for deferred gain invested in a qualified opportunity fund

New Forms Form 461, Limitation on Business Losses Form 965, Inclusion of Deferred Foreign Income Upon Transition to Participation Exemption System, and related forms and schedules Form 8979, Partnership Representative Revocation, Designation, and Resignation Form, and related forms and schedules Form 8990, Limitation on Business Interest Expense

Retired Forms Form 2106-EZ, Unreimbursed Employee Business Expenses Form 1065-B, U.S. Return of Income for Electing Large Partnerships, and related forms and schedules Form 4626, Alternative Minimum Tax-- Corporations

Resources IRS.gov/Forms IRS.gov/TaxReform IRS.gov/FormChanges IRS.gov/FormsUpdate IRS.gov/Form1040, etc. IRS.gov/DownloadForms IRS.gov/PriorYearForms IRS.gov/DraftForms