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The Whirlwind That Was the 2018 Tax Filing Season

 

The Whirlwind That Was the 2018 Tax Filing Season

With one of the wildest tax filing seasons now in the books, I thought it would be a great time to reflect on the craziness of the last several months. We knew it was going to be a wild ride this year with it being the first filing season impacted by the passage of the Tax Cuts and Jobs Act (TCJA) but, oh my, did it ever live up to EXCEED those expectations. It felt as if an eight second successful bull ride became a marathon ride of twists and turns.

On December 22, 2018, exactly one year after the passage of the TCJA, the federal government shut down for a record 35 days. For the IRS, this couldn’t have come at a worse time. It had presumably a mountain of work ahead of it to finalize tax forms and prepare for the 2018 filing season. Ironically though, the IRS was somehow able to release the final 199A regulations during the shutdown.

The tax law change brought with it new forms and reporting requirements such as K-1 reporting related to wages, qualified business income, and unadjusted basis in business property along with deciding the most useful and appropriate information related to the new interest expense limitations under Section 163(j). And of course, there were the significant changes to the 1040 presentation. These changes generally increased the time it took to prepare bank (and other) tax returns. The increased time and reporting with S-corporation bank returns generally caused returns to be completed later and closer to their March 15 deadline. This also created a domino effect on the C-corporation returns that followed, requiring many returns to be extended beyond the April 15 deadline. 

Another sign of this filing season’s challenges happened on February 28, the day before the deadline, when the IRS extended the filing deadline for farmers from March 1 to April 15. This is a rare occurrence with it happening only a few times in the last several decades. 

In another TCJA impact-related IRS action, the IRS announced it would waive underpayment penalties related to individuals who would be required to make estimated payments due in January 2019. The waiver reduced the required estimated payments and withholdings threshold from 90% to 85% of the tax shown on individuals’ 2018 returns. The IRS went further in March 2019 by reducing the threshold even further to 80% of the tax shown on individuals’ 2018 returns. These penalty waivers were another indication of the significance of the TCJA.

While this filing season has been unforgettable, to say the least, the great news is that most community banks are benefiting from lower tax rates (either corporate or pass-through) and the positive impact on net earnings and capital. Thank you to all our clients for your patience and cooperation as we worked our way through this filing season and beyond; striving for value-added outcomes while serving you is the driving force behind what we do.

Author(s)

Handel_Toby
Toby Handel, CPA
Senior Manager
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