Federal Income Tax Changes - For the 2018 Tax Year (Course Id 1321)

Taxes - Taxes for Course Id 1321

Each year, various limits affecting income tax preparation and planning change. Some changes commonly occur each year as a result of inflation indexing, while others occur because of new legislation or the sunsetting of existing law. In addition, the Tax Cuts and Jobs Act of 2017 became effective in 2018.

This course will examine the tax changes that took effect in 2018 that are more significant from the perspective of an income tax preparer. Some context will be supplied, as appropriate, to assist readers in understanding the changes. In addition to these customary annual changes affecting various limits, other tax changes effective in 2018 that were brought about by the Tax Cuts and Jobs Act of 2017 will be discussed.

NASBA QAS - NASBA Registry - IRS Enrolled Agents - Registered Tax Return Preparers - 1321

Course Learning Objectives

• List the 2018 changes in various amounts including –
  o Standard mileage rates,
  o The standard deduction,
  o The AMT exemption amount,
  o The limits related to income from U.S. Savings Bonds for taxpayers paying higher education expenses, and
  o Deductions for qualified long-term care insurance premiums;
• Identify the 2018 tax credit changes affecting the –
  o Saver’s credit,
  o Earned income credit, and
  o Adoption credit;
• Recognize the 2018 changes affecting –
  o Health Savings Account (HSA) and Archer Medical Savings Accounts (MSA) requirements and contribution limits,
  o Roth IRA eligibility, and
  o Traditional IRA contribution deductibility for active participants in employer-sponsored qualified plans;
• List the changes effective for 2018 brought about by the Patient Protection and Affordable Care Act with respect to the –
  o Individual penalties under the shared responsibility provision mandating insurance coverage,
  o Small employer premium tax credit, and
  o Applicable large employer mandate; and
• Identify the principal provisions of the Tax Cuts and Jobs Act of 2017 affecting tax preparers and planners.

Chapter 1
Changes in Various Limits

• Calculate the standard mileage deductions for –
  o Use of a personal vehicle to obtain medical care, and
  o Charitable use of a personal vehicle;
• Identify the 2018 standard deduction amounts available to taxpayers;
• Recognize the changes made to the alternative minimum tax exemption amount for 2018;
• Apply the tax-free United States savings bond income limits for taxpayers who paid qualified higher education expenses in 2018; and
• Calculate the tax-deductible premiums for and tax-free benefits received under qualified long-term care insurance contracts.

Chapter 2
Tax Credit Changes

• Calculate the retirement savings contribution credit available to eligible taxpayers;
• Recognize the rules and income limits applicable to eligibility for the earned income credit; and
• Apply the adoption credit rules.

Chapter 3
PPACA-Related Tax Changes

• Health flexible spending arrangement contribution limits;
• Penalty for individuals who fail to comply with the PPACA mandate to maintain minimum essential coverage in 2018;
• Small business health care tax credit;
• Large employer shared responsibility provision; and
• Large employer reporting and notification requirements.

Chapter 4
Changes in Archer MSAs, HSAs & IRAs

• Recognize the eligibility rules applicable to Archer MSAs and HSAs;
• Calculate the maximum contributions that may be made to an Archer MSA;
• Apply the tax treatment rules to contributions to and distributions from Archer MSAs and HSAs;
• Calculate the traditional IRA tax deduction available to a taxpayer who is an active participant in an employer-sponsored retirement plan; and
• Recognize the MAGI limits that apply to a taxpayer’s eligibility to make a Roth IRA contribution.

Chapter 5
Tax Cuts and Jobs Act: Principal Individual Taxpayer Changes

• Identify individual tax rate changes affecting taxpayers;
• Recognize the changes made to the various exemptions and deductions available to taxpayers;
• Calculate the child tax credit;
• Identify the additional educational institutions considered eligible educational institutions under section 529 Tuition Savings Plans; and
• Determine the anticipated changes to the individual taxpayer penalty for failing to maintain minimum essential coverage.

Course Learning Objectives

Introduction to the Course

Chapter 1 – Changes in Various Limits

Chapter Learning Objectives

Introduction

Standard Mileage Rates

Business Use of a Taxpayer’s Personal Vehicle

Personal Vehicle for Charitable Purposes

Use of a Taxpayer’s Personal Vehicle to Obtain Medical Care

Use of a Taxpayer’s Personal Vehicle to Move

Standard Deduction Increased

Standard Deduction for Blind and Senior Taxpayers

Standard Deduction Eligibility

Exemption Amount

Alternative Minimum Tax (AMT)

Tax Preference Items Added Back to Produce Alternative Minimum Taxable Income

Alternative Minimum Tax Exemption Amount Increased

Education Savings Bond Program

Qualified Education Expenses

Eligible Educational Institutions

Qualified Education Expenses Reduced by Certain Tax-free Benefits Received

Figuring the Tax-Free Amount

Education Savings Bond Program Eligibility Subject to Income Limits/Filing Status

Determining Taxpayer’s Modified Adjusted Gross Income

Limitation on Itemized Deductions

Qualified Long-Term Care Insurance Premiums and Benefits

Favorable Benefits Tax Treatment Reserved for Chronically-Ill

Tax-Qualified Long Term Care Premiums Deductible within Limits

Tax-Qualified Long Term Care Insurance Benefits Tax-Free within Limits

Social Security Taxable Earnings Limit

Maximum Capital Gain/Dividend Tax Rate Increased for High-Income Taxpayers

Summary

Chapter Review

Chapter 2 – Tax Credit Changes

Chapter Learning Objectives

Introduction

Retirement Savings Contribution Credit

Saver’s Credit Applicable to Range of Retirement Contributions

Saver’s Credit Eligibility Based on Income and Filing Status

Earned Income Credit

EIC Rules Applicable to Everyone

Adjusted Gross Income Limits

Valid Social Security Number Required

Tax Filing Status

Citizenship or Residency

Foreign Earned Income

Investment Income

Earned Income

EIC Rules That Apply if Taxpayer Has a Qualifying Child

Relationship, Age, Residence and Joint Return Tests

Qualifying Child of More than One Person Rule

Taxpayer as the Qualifying Child of Another Taxpayer Rule

EIC Rules That Apply if Taxpayer Does Not Have a Qualifying Child

The Age Rule

The Dependent of Another Person Rule

The Qualifying Child of Another Taxpayer Rule

The Main Home Rule

Figuring the Amount of the Earned Income Credit

Adoption Credit/Exclusion

Eligible Child

Qualified Adoption Expenses

The Benefit

Timing of the Credit/Exclusion

Benefit Phased-Out at Higher Taxpayer MAGI

Summary

Chapter Review

Chapter 3 – PPACA-Related Tax Changes

Chapter Learning Objectives

Introduction

Summary of Existing PPACA-Related Tax Requirements

Health Flexible Spending Arrangement Contributions

PPACA’s Individual Shared Responsibility Provision

Taxpayer Options Under the Shared Responsibility Provision

Minimum Essential Coverage

Employer-Sponsored Coverage

Individual Health Insurance Coverage

Coverage Under Government-Sponsored Programs

Limited Benefit Coverage May Not Provide Minimum Essential Coverage

Exemptions from Penalty for Failure to Maintain Minimum Essential Coverage

Gaps in Coverage Shorter Than Three Consecutive Months

Exemption for Lack of Affordable Coverage

Qualifying for a Statutory Exemption

Individual Shared Responsibility Payment

Refundable Premium Tax Credit to Assist in Purchase of Qualified Health Plan

Eligibility for Credit

Federal Poverty Level

Qualified Health Plan

Amount of the Credit

Benchmark Plan

Taxpayer’s Expected Contribution

Calculating the Credit

Adjusted Monthly Premium

Special Rules Applicable to the Tax Credit

Reconciling Advance Premium Tax Credits

Small Business Tax Credit

Eligibility Requirements

Limitations Affect Health Insurance Premium Credit

Full-Time Equivalent Employee (FTE) Limitation

Average Annual Wage Limitation

Average Premium Limitation

State Premium Subsidy and Tax Credit Limitation

Calculating the Credit

Large Employer Shared Responsibility: The Employer Mandate

Employers Not Offering Coverage

Employers Offering Coverage

Summary

Chapter Review

Chapter 4 – Changes in Archer MSAs, HSAs & IRAs

Chapter Learning Objectives

Introduction

Medical Savings Accounts

High Deductible Health Plan Requirement

Archer MSA Contributions

Penalty for Excess Contributions

Special Rules for Employer-Installed MSAs

Archer MSA Distributions

Archer MSA Rollovers

Account Transfer Incident to Divorce

Account Transfer at Death

Archer MSA Taxation

Contribution Tax Treatment

Distribution Tax Treatment

Archer MSA Distribution Tax Penalty

Health Savings Accounts

HSA Eligibility

HSA High Deductible Health Plan Requirement

HSA Contributions

HSA Contributions from Multiple Sources

Additional Contributions for Age 55 and Older Account Holders

First-Year Contributions for New Account Holders

Maximum HSA Contributions may be Reduced

Penalty for Excess Contributions

Employer HSA Participation

HSA Distributions

HSA Rollovers

Account Transfer Incident to Divorce

Account Transfer at Death

HSA Taxation

Contribution Tax Treatment

Distribution Tax Treatment

Tax-Free HSA Distributions

Taxable HSA Distributions

HSA Distribution Tax Penalty

Roth IRA Eligibility

Modified Adjusted Gross Income

Limits on Contributions

Traditional IRA Contributions by Active Participants

Tax Treatment of Contributions by Active Participants

Reduced Deductibility of Traditional IRA Contributions for Active Participants

Summary

Chapter Review

Chapter 5 – Tax Cuts and Jobs Act:

Chapter Learning Objectives

Introduction

Tax Cuts and Jobs Act of 2017

Individual Tax Rate Changes

Exemptions and Deductions

Credits

Tuition Savings Plans

IRA Recharacterization

Individual Responsibility Penalty under ACA

Estate and Gift Tax Exemption

Summary

Chapter Review

Appendix A

Glossary