Alternative Minimum Tax (AMT) Statistics
Tax reform significantly reduced the number of taxpayers that were able to itemize deductions on Schedule A which were added back when computing the alternative minimum taxable income. The new laws raised the exemption amounts and increased the income levels in which the exemptions are phased out, decreasing the number of individuals who qualified for the AMT. The IRS reported that for the 2018 individual tax returns filed through July 2019, only 78,328 filers owed the AMT, totaling $967.6 million, compared to 4.07 million filers, totaling $21.7 billion for the same period last year.
Medical Expense Deduction
The Tax Cuts and Jobs Act increased the threshold for deducting itemized medical expenses from 7.5% to 10%. Some believe that Congress may restore the 7.5% threshold. We will keep you updated if the increase is reversed.
Error in Schedule D
The IRS announced that an error was found in the Schedule D worksheet for those taxpayers who reported gains from collectibles taxed at 28%, or the recapture of depreciation from real estate which is capped at 25%. This affected tax returns filed before May 16, 2019. Taxpayers affected by this error will receive a letter from the IRS and will be notified if they owe additional taxes or are due a refund.
Underpayment of Estimated-Tax Penalty
The IRS announced that it is automatically waiving the estimated tax penalty for the more than 400,000 eligible taxpayers who already filed their 2018 federal income tax returns but did not claim the waiver. The automatic waiver applies to any individual taxpayer who paid at least 80% (earlier this year, the IRS lowered the usual 90% penalty threshold) of their total tax liability through federal income tax withholding or quarterly estimated tax payments, but did not claim the special waiver available to them when they filed their 2018 return earlier this year. If this applies to you, you do not need to take any action to receive this relief. Any eligible taxpayer who already paid the penalty will receive a refund check regardless if they requested penalty relief.