Page 8 - Supplement to Income Tax 2019

Recent Tax Developments*

Medical expense deduction. Under the TCJA, the 7.5% of The AICPA (American Institute of CPAs) says that
adjusted-gross-income (AGI) floor for deducting medical the IRS should be providing more generous penalty relief
expenses applied only for 2017 and 2018. Unless Congress given the uncertainties related to the TCJA. It recommends
extends the 7.5% floor, the floor for 2019 will be 10% of that at a minimum, the IRS should lower the payment
AGI for all taxpayers, and as of yet, Congress has given no threshold to 80%, and extend the waiver to those who
indication that there will be an extension. request a filing extension (Form 4868) and pay at least
80% of the taxes owed with that request. In addition,
Disaster relief. As of yet, Congress has not enacted tax relief
measures for victims of Hurricanes Florence and Michael or where the reduction to 80% is not enough, the IRS
the 2018 California wildfires. should provide reasonable cause exceptions. Furthermore,
in appropriate cases, the IRS should allow penalty relief to
Other tax measures. In 2019 Congress may consider various be claimed automatically on 2018 returns, without having
tax proposals addressing health care, retirement planning to file Form 2210, such as by writing “TCJA Relief” on
and further tax relief, among others. If enacted, these could the first page of Form 1040.
could affect your wage withholding and estimated tax
payments for 2019. Check jklasser.com for developments. IRS Mileage Rates for 2019

(pages 354, 410, 461-462, 736)
IRS Provides Limited Waiver of You may be able to use the IRS’s standard mileage rate
Underpayment Penalty for 2018 instead of deducting actual expenses when using your car

(pages 529-530) for business, medical, moving, or charitable purposes. For
2019, the standard mileage rates are:
• For business driving, 58 cents per mile (up from
Some taxpayers may unexpectedly find themselves subject 54.5 cents).
to an estimated tax penalty for 2018 because of the • For medical expenses, 20 cents per mile (up from
elimination of deductions for personal exemptions and 18 cents). The same rate applies to moving expenses
certain itemized deductions under the Tax Cuts and Jobs for certain military personnel; no other taxpayers can
Act. Wage earners generally had less federal tax withholdings claim a moving expense deduction.
taken from their 2018 pay because the withholding tables • For driving as a charitable volunteer, 14 cents per
were changed to reflect the lower TCJA tax rates and higher mile (the rate is fixed by statute).
standard deduction, but the tables did not factor in the
loss of deductions. Thus, some employees who expected If you use a standard mileage rate, keep records of your
to avoid an underpayment penalty for 2018 by having mileage as well as records of parking fees and tolls, which
withholdings that covered at least 90% of their 2018 tax may be added to the applicable 58, 20, or 14 cents-per-mile
liability (or if lower, 100%, or in some cases 110% of their rate in figuring your deduction for 2019.
2017 liability), may find that they did not withhold enough. Standard mileage rate for business vehicles. Keep in
Similarly, taxpayers who made estimated tax payments mind that to use the IRS standard mileage rate for a
to cover non-wage income may not have paid enough to business vehicle in lieu of actual expenses (and depreciation
meet the threshold. Finally, where estimated tax payments if you own the vehicle), you have to use the IRS allowance
were made in addition to federal tax withholdings, the in the first year you place the vehicle in service to use
combination may have fallen short. it in later years. For example, if you bought a truck for
In response, the IRS announced that it is lowering the your business in 2018, you must decide whether to use
90% payment threshold, but only to 85%. It is waiving the the 2018 IRS rate of 54 .5 cents per mile on your 2018
penalty for taxpayers whose total withholdings during 2018 Form 1040, or to claim actual expenses plus Section 179
plus estimated tax installments made by January 15, 2019, expensing, bonus depreciation, or modified accelerated
were at least 85% of their total 2018 liability. If less than cost recovery system (MACRS) depreciation if this will
85% was paid, there is no relief, and the penalty will be give you a bigger deduction. If you do not use the 54.5
calculated under the regular rules using the 90% threshold cents IRS rate for 2018, you will not be allowed to use
(Notice 2019-11, 2019-05 IRB 430; News Release IR- the 58-cents-per-mile rate for that vehicle on your 2019
2019-03). Taxpayers must file Form 2210 to request the tax return or to use the then-applicable IRS rate for years
85% penalty waiver; follow the Form 2210 instructions. after 2019.

4 | Supplement to J.K. Lasser’s Your Income Tax 2019