Tax Attic for 1-3-19

Welcome to the first Tax Attic article of 2019. The New Year promises to be a great one. Thanks to Congress and our hard work, Action Tax is going to be busy this tax season.  Deb and I have also some travel and camping plans. Grandkids Rowan and Archer will be 6 and 3 and will be all the more fun to be around. I’m also expecting to achieve a few great sports accomplishments this year.  This could be the year that I finally get a hole-in-one in golfing and bowl that elusive  300 game.  Of course, I have been expecting to do both of these since I was old enough to know what was meant by a hole-in-one in golf and a perfect game in bowling. That knowledge might have first occurred about 55 years ago so I have been trying for a while now. I have a relative and plenty of friends who have pulled off the hole-in-one feat but a 300 in bowling is a horse of a different color. There are no shorter par 4’s and par 3’s in bowling to give you a couple of shots a round at that coveted hole-in-one. It takes 12 straight strikes to turn the trick. With every added strike, it’s like having to birdie progressively longer par 4’s and that 12th strike seems like you have to eagle a long par 5 needing a Tin Cup type of shot over the water to close the deal. It’s tough. I have come close but some years the Lions have come close to being a good team, too. Close can make for a good story but it’s small consolation.  But this could be my year. Wish me luck. In any event, I’m looking forward to 2019.

This tax season promises to be very interesting.  As I have written about over the course of the year, the changes are many and affect everyone filing a tax return. That was not a mis-print. Every return will be affected by the Tax Cuts and Job Act. Some returns will be easier with fewer variables while others will be more difficult with more variables. Many taxpayers will pay less tax this year but may actually get smaller refunds because of the withholding changes made early in 2018. Some taxpayers will owe for the first time. Others will get larger refunds. This amount of change is unprecedented in the time I have been professionally preparing tax returns. For those keeping track of such things, that would be since 1978. Without question, all tax professionals now rely upon tax software to help us through the process.  The big difference between my software and the individual commercial style that is purchased through Office Max, Best Buy, Meijer or Menards is my software doesn’t ask me questions. If anything , I ask it “what if” questions. It expects me to have a working knowledge of the tax law. Part of that working knowledge is knowing what options, if any, are available to a taxpayer if the bottom line comes out looking a little on the ugly side. It may be February  1 or March 1 or April 1, well past December 31, but there are still a few moves that can still be made to influence positively a tax return.  Let’s itemize those moves this week and go over them in more detail starting next week.  First, and the #1 move that I see made, is to contribute to a Traditional Individual Retirement Account. There are limits and phase-outs but a deductible contribution, in the right circumstance, can be just what the doctor ordered. Second, more and more taxpayers have Health Savings Accounts today. There are contribution limits but fewer caveats. It’s a great tax savings tool. Third, many taxpayers with educational expenses can choose to claim a credit or a deduction. In the right circumstance,  a deduction could be more helpful than a credit. Fourth, self-employed taxpayers can make contributions to a SEP retirement plan right up until the day they file the return, including an extension. Actually, I have gone to all-day tax seminars where each of these topics is the sole topic covered so I will have no trouble writing a few articles covering these options.  Welcome to 2019! This is Jerry Coon signing off.