2019 Most Common Tax Return Questions

Is your tax bill not up to your expectation under the application of the new tax law? You may hear tax cut out on the streets but it may not always be the case, at least not to all individuals. Take a glimpse of the most common tax return questions to understand more about why your tax return are the way it is.

1. I thought my tax bill was going to decrease. What happened?

For many people living in high-tax states like New York, California, New Jersey and Connecticut, there’s one overriding reason their tax bills have risen: Their state and local tax deduction, known as SALT, will be capped at $10,000. This includes state and local income taxes, as well as real estate taxes.

2. I was told there would be a tax cut for most people. So why is my return showing a tiny refund, or even an amount due?

In early 2018, the I.R.S. took its best shot at offering guidance to employers about how to change tax withholding from paychecks. In general, it suggested decreases, since the 2017 law was supposed to be a cut. That should have resulted in bigger paychecks for most people.

3. Should I take the standard deduction or itemize my deductions this year?

Before breaking down what’s changed, let’s back up and explain the basics: Taxpayers are entitled to take a standard tax deduction amount, or they can itemize their deductions individually; they can deduct whichever amount is higher, resulting in a lower tax bill.

4. Is it true that alimony is no longer deductible?

Under the previous law, spouses paying alimony could deduct those payments on their returns, while the recipients had to include the income on theirs. That remains the case for divorce agreements finalized on or before Dec. 31, 2018 (unless a couple changes the agreement after then). Therefore it’s true for returns filed this year. But for divorces completed in 2019 and later, alimony payments will no longer be deductible, and recipients will not have to include them on their returns.

5. I heard that small business owners can’t deduct meals and entertainment anymore. Is that true?

You can no longer deduct entertainment or amusement, generally defined as taking a client to, say, a basketball game. But you can still deduct 50 percent of what you spend on meals, as long as you are dining with clients, traveling for business or attending a business convention (or something along those lines). Providing meals to employees for an office party or a meeting is still 100 percent deductible.

6. Do I qualify for pass-through status and its 20 percent deduction?

The new tax laws allow some business owners — those who are set up as so-called “pass-through” companies — to deduct 20 percent of their qualified business income. Cue the rush to the tax professionals -

Written by: Benjamin Lau, CCL Tax & Accounting Services Inc.