Articles Posted in Taxes

Dollarphotoclub_88177383-300x300Taxpayers will be able to file federal income taxes starting next filing season on a new postcard-sized Form 1040. The IRS officially released the draft 2018 Form 1040 on June 29th.

Draft Form 1040

According to the IRS, the new base Form 1040 will be finalized this summer. The IRS plans to work with the tax community to finalize the form. “This early release is part of our standard process to invite stakeholder input into draft forms before finalizing them,” the IRS spokesperson told Wolters Kluwer.

By Paul Czepiga

AdobeStock_182906497-300x193We wrote not too long ago about some Connecticut estate tax changes that occurred due to legislation passed in October 2017. That legislation tied the Connecticut gift and estate tax exemption to the federal exemption amount.

The federal exemption amount was, at the time that Connecticut tied it self to it, $5.49 million. Unexpectedly in December 2017, just two months after Connecticut’s change, as part of President Trump’s tax overhaul, the federal exemption amount suddenly increased to $11.18 million.

AdobeStock_71412567-300x194States, including Connecticut, are looking for loopholes to soften the impact of a new $10,000 cap on the state and local tax deduction also known as SALT.  And the IRS wants to put a stop to local governments using creative workarounds.

In the meantime, in response to the reform, Connecticut legislature passed a new law making several state and local changes. Two of its provisions are designed as workarounds to SALT:

  1. The first provision is a new entity-level income tax on most pass-through businesses that is offset by a state personal or corporation income tax credit for the entity’s members. Because entity-level taxes remain deductible at the federal level, pass-through businesses will be able to claim this new state tax as a deductible expense against their federal taxes and pass along the benefit of the deduction to their members.
  2. The second provision is that municipalities will be allowed to provide a property tax credit to eligible taxpayers who make voluntary payments to municipally-approved nonprofits (i.e. community supporting organization) and is designed to allow taxpayers that make these payment to claim a federal contribution deduction for the donation to the nonprofit.

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