Moving Cost Tax Deduction

If you move in 2018, you will no longer be able to deduct moving costs unless you are in the armed forces. Also if you receive employer reimbursements for moving expenses, it will now be taxable income. This change came about in the Tax Cuts and Jobs Act effective 1/1/2018.

IRS interest rate on late income tax payments

The current rate is now 5% (annual basis). It increased from 4% on April 1, 2018. The rate can change each quarter.

Trust Tax Rate

Trusts (form 1041) are taxed at rates from 10% to 37%. However the 37% rate kicks in at taxable income over $12,500. The government is trying to encourage the current distribution of income from trusts by having the tax rate so high. The kiddie tax on children's unearned taxable income will also now be based on the trust rates instead of the parents' tax rate.

The New Corporate Tax Rate

C corporations now pay at flat rate of 21%. In 2017 the top rate was 35% and the first $50,000 in taxable income was 15%. Most large public companies will now pay at the lower rate. In order to level the playing field between C corporations and pass through entities such as partnerships and S corporations, the new tax reform act allows a 20% deduction of qualified business income.

2018 Tax Rates Comparison to 2017 Tax Rates

There are 7 tax rates in both years going from 10%, 15%, 25%, 28%, 33%, 35%, and 39.6% in 2017 to 10%, 12%, 22%, 24%, 32%, 35%, and 37% in 2018. Every tax bracket in 2018 is better than 2017 by 3 to 4 points except for the 10%, 32%, and 35% tax brackets which are basically the same for both years. The bracket spread in taxable income is better also. For example, the top rate for joint returns kicked in at $470,700 of taxable income in 2017 but now in 2018 it doesn't start until taxable income reaches $600,000.

When do You Have to Send 1099's?

If you have a business and use the services of an individual paying them $600 or more during a calendar year, then you need to send that person a 1099-Misc.  You don't have to worry about sending 1099's to corporations, when you buy merchandise, and when you make payments for personal services for your home. You should ask anyone providing services to your business to fill out a form W-9 before you make the first payment to them. This will give you their address and social security number for the 1099. It can be very difficult getting that information at the end of the year. Penalties for not filing  1099's are up to $250 per failure.

Pass Through 20% Deduction for 2018

The new 20% deduction for qualified business income is simple for those taxpayers with taxable income (line 43 on the 2017 form 1040) less than $315,000 filing joint or  $157,500 filing single. They get to deduct the lesser of 20% of qualified business income or 20% of taxable income minus net capital gains. Qualified business income is income from a US trade or business which can be a sole proprietorship, partnership, S corp, LLC, trust. or estate. Qualified business income is not W-2 wages, interest, capital gains or most dividends.