The bad news is that the federal government is still shutdown but the good news is that somehow the IRS will be opening the E-file system Jan 28th, 2019 and will be issuing refunds! We aren’t sure if they will be issued on the normal schedule but they said refunds will be issued. Many of the hotlines that tax professionals use to resolve issues will still be down along with standard taxpayer customer service so things will get interesting.
Everyone is hoping the political waves will be calmed prior to tax filing season. While the government is shutdown, a few “critical” functions will continue to operate. Even though tax return filing deadlines will still be enforced, the government will not be issuing refunds. They will still expect YOU to make payment and file timely but they won’t be making timely payments to you if going the opposite direction. Most of the ACS and collection functions are also suspended, making it hard for taxpayers who are actively working to resolve an outstanding tax issue with the IRS.
In the new Tax Cuts and Jobs Act, the unreimbursed employee expense deduction is completely gone. This deduction was formerly located on line 21 of Sch A under “Job Expenses and Certain Miscellaneous Deductions” and was reported on form 2106. The total amount of the other deduction section had to total over 2% of your AGI but for most people that used the deduction, that wasn’t hard to achieve.
If you’re not familiar with this deduction, you most likely don’t use it because those who do generally spend a considerable amount of time documenting their employee expenses that are not reimbursed. Most of my clients are business owners so those expenses go on the business (Sch C, Corp or Partnership) but this deduction is for people who are required to spend their own money or use their own resources as an employee and are not paid back for it. Salespeople, railroad workers, construction workers, ministers and people that are required to drive a high number of miles in their own car without reimbursement are a few of the people that will be hit the hardest. If a sales person drove 20,000 miles in 2017 with their own car and was not reimbursed, they would be entitled to a $10,700 deduction on form 2106 (assuming that is over 2% of AGI and they itemize). That is a lot money in deductions that will disappear!
Someone I spoke with recently asked me if it was “totally gone”. Yes its totally gone. If you want to remain a W-2 employee and you are required to drive your own car or spend your own money for your job, you may want to consider renegotiating those terms with your employer. Company’s often use the line, “well, you can deduct it on your taxes”. Employees will need to come to terms with eating that cost or petitioning their employers to fork out the cash
Bitcoin is supposed to be completely anonymous and "untraceable" through it's encrypted network. But it was just discovered that the IRS has spent well over $100K on a proprietary software that tracks Bitcoin transactions and attempts to identify the individuals on both the buyer and seller side of the transaction. The vendor is named Chainalysis and their tracking tool is called "Reactor".
The Daily Beast discovered the contract between the IRS and Chainalysis where they expanded their order for additional licenses and services...sounds like they were happy with the product. You can view the contract and read more about it here.