Recent changes in tax laws eliminating or curtailing some long-time deductions and credits could turn ordinary taxpayers into inadvertent tax cheats.
Recent changes in the tax laws eliminating or curtailing some long-time deductions and credits could turn ordinary taxpayers into inadvertent tax cheats if they are not careful.
Sorrentino recently completed an eight-month federal prison sentence after pleading guilty in 2018 to a single count of tax evasion. He paid a $10,000 fine and $123,000 in restitution. "A Paycheck Checkup can help you see if you're withholding the right amount of tax from your paycheck. Too little could mean an unexpected tax bill or penalty," the IRS website warns.
Taxpayers can avoid the uncertainty about what is and is not deductible — and possibly save time and money — by taking the standard deduction instead of itemizing their deductions. For the 2019 tax year, the standard deduction rises to $12,200 for an individual taxpayer, or $24,400 for a married couple filing jointly. But Paladini noted that for some people, taking the standard deduction could mean leaving some money on the table.
The new federal tax law effectively ended the individual mandate under the Affordable Care Act by eliminating the tax penalty for those who go without health insurance. But in response, several states have passed individual mandates of their own with penalties that can be as high as the cost of insurance coverage. In New Jersey and the District of Columbia, the mandates went into effect in 2019. In California, Rhode Island and Vermont, they took effect this year.
Another area where taxpayers can get into trouble involves dependents. The new tax law cracks down on parents who shelter investment income from taxes by putting it into their children's names. Now, a child's unearned income above certain levels is taxed at the highest marginal rate — 37% — even if the parents' tax bracket is lower.
Some preparers will even falsify dependents in order to maximize the credits. Paladini warned that the IRS looks closely at year-to-year changes in dependents.
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