Listening to late-night television ads pitching glitzy tax software might seem like an easy way to tackle filing for taxes.
But don't tell that to millions of small business owners who make a living selling their products and services online through marketplaces like eBay and Amazon. A recent Supreme Court ruling is seen by legal experts as giving states authority to require such web-based entrepreneurs to include sales taxes in their customers' bills.
The new court mandate "means that those millions of small businesses may now need to collect and remit sales taxes in the 45 states that have them. That could be an expensive and time-consuming task, especially if new rules differ between states," reports the Wall Street Journal.
The article relates concerns by a Chicago-area entrepreneur who sells about $250,000 worth of apparel-related items a year through sites like eBay and Amazon. "Trying to follow all the thousands of laws of tax jurisdictions across the country would put us out of business. That is all I would do all day," she tells the paper.
Simply put, laws aren't static, and neither are taxes. Saving a few bucks by filing in a silo has always been a tax practice fraught with red flags. The IRS is so concerned about the rising amount of penalties issued that it has created a special website just to help taxpayers reduce common mistakes.
By the government's own estimate, the number of people paying penalties for miscalculations that lead to underestimating their taxable liabilities reached 10 million in 2015, a 40% jump in five years.
The first major revision of the U.S. tax code in decades is set to start impacting taxpayers filing their 2018 returns. Those sweeping changes "pose a significant challenge to the IRS, corporations and individuals, who will have to both get up to speed on the changes," warns Schwab in a recent tax policy analysis.
At its most basic level, the 2017 Tax Cuts and Jobs Act includes revisions to individual tax brackets. With those changes come varying levels of taxable income needed to figure out where each taxpayer now falls. The TCJA also nearly doubles the standard deduction ($12,000 or individual filers and $24,000 for joint filers).
Choices must be made in terms of deciding whether to take such a tax write-off or itemizing for specific expenses. Other issues taxpayers might want to take a fresh look at this year include: tax credits for children; caps on state and local taxes; as well as repealing recharacterizations of Roth conversions.
For owners of "pass-through" businesses -- entities such as limited liability corporations, partnerships, sole proprietorships and S-corporations -- a new 20% deduction is possible. The rules of what type of organizations are eligible and the particulars of how to apply such benefits to a business owner's overall tax situation can vary widely by individual circumstances.
The message coming from Washington and courts around the country seems clear: As tax codes evolve and individual financial situations become more complex, it's probably going to actually save money for more people to reach out to an objective third-party.
IFA's professional tax specialization service, IFA Taxes, can serve as an important resource to not only to avoid filing mistakes, but also to make sure nothing falls through the cracks in terms of taking advantage of the new law's many tax breaks.