Piper’s Tax Change Letter: 2019

Did you know that Felisha is required to take 72 hours of Continuing Education, over a three-year period, in order to maintain her Enrolled Agent status with the IRS? But Felisha highly values education, not only for herself, but also for her team here at Piper, as well as for you. Last year Felisha had 50 Continuing Education hours and so far, this year, just in January, she’s already taken 25! She sifted through all the tax updates and law changes for 2019 that would be most relevant to you, our client. See all the changes below.

Individual Taxpayer Changes

  • You can now opt-in for an Identity Theft Pin with the IRS. If you are worried about ID theft with your tax return, this is a great option. The IRS would issue you a new six-digit pin number each year that would be necessary to efile your tax return. It’s an additional level of protection for your identity.
  • Arizona has conformed to the Federal Tax Update. Beginning in 2020, Arizona income tax returns for tax year 2019 will include a matching federal standard deduction ($12,200 single, $18,350 head of household, $24,400 married filing joint), the exemptions for individuals and dependents have been removed, there is a $100 child tax credit for dependents under 17 years of age and $25 for dependents 17 and older, and it allows taxpayers to increase their standard deduction by 25% of the charitable deductions that would have been claimed as an itemized deduction.
  • The age for Required Distributions from your IRAs has changed from 70 ½ to 72 going forward. Meaning if you turn 70 ½ this year, you don’t need to worry about making the minimum withdrawal. If you turned 70 ½ in 2019, the old rule still applies.
  • There is no longer a max age for IRA contributions as long as you have income!
  • The new alimony rule is in effect for any divorces that happened after 12/31/2018. If you pay alimony to your ex or you receive alimony, it’s not longer a deduction to the payer or income to the receiver.
  • The medical deduction threshold is now permanently at 7.5%.
  • The health insurance shared responsibility payment penalty is gone!

Business Changes

  • If your company offers high-deductible health plans you can contribute to your employee’s Health savings accounts (HSAs). This benefit, which is tax-free to employees and exempt from employment taxes, is capped in 2019 at $3,500 for self-only coverage and $7,000 for family coverage. Proc. 2019-25 shows 2020 amounts as $3,550 single and $7,100 family.
  • If you aren’t subject to the employer mandate, you can reimburse employees for their individually obtained health coverage up to a set amount for the year through a Qualified small employer health reimbursement arrangements (QSEHRAs). In 2019, this is a maximum $5,150 for self-only coverage and $10,450 for family coverage.
  • Form W-4 for 2019, which is used by employees to indicate their withholding allowances, is essentially unchanged from the 2018 version. The value of a withholding allowance in 2019 is $4,200 (it was $4,100 in 2018). Employees do not need to submit new forms for this year unless they want to change their withholding allowances or claim exemption from withholding or if they didn’t change it from 2017.
  • In the aftermath of last year’s Wayfair US Supreme Court case allowing individual states to apply “nexus” rules to internet-based sales, the fall-out for small business continues for online retailers selling out of state. In most cases (24 states), the states have imposed a nexus application once sales have exceeded $100,000 OR 200 transactions. For the small business selling many inexpensive items this
  • nightmare of compliance may be one of the forbidding aspects of small business growth in our country’s history. Because 48% of our GDP comes from small business according to the SBA, the long-term negative effects of this legislation are chilling. One state, Washington, has become a leader in anti-small business activity with their $10,000 threshold! This is MAJOR law change and does effect everyone!
  • We can now efile your Arizona business tax return! No more mailing!

There is a lot more! But it’s too much to list here. Please make note of any questions you might have for us and we will answer all your questions at your tax appointment.