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    Question for Virginia tax pros

    I only prepare a few VA returns, and no 2018 tax returns for the Commonwealth have yet been completed.

    A VA resident has asked me about how VA is/might be/will be handling itemized deductions for 2018. Apparently there is some continuing, current controversy and certain submitted returns are not being processed by the VA Dept of Taxation.

    Question #1: It appears that VA has required the state return to mimic the federal re the use of itemized deductions / standard deduction. If itemizing on the federal, itemize on the state. If did not itemize on the federal, cannot itemize on the state. Is that (still) correct?

    Question #2: It appears the greater controversy, somewhat related to the first question, is whether VA can "ignore" certain federal issues for someone who itemizes on the federal. As an example, the SALT limit would apply to the federal Schedule A but not to similar numbers on the related VA Schedule A. (This is a separate issue from the usual state adjustments for additions/reductions related to federal/state laws.) Is this a possibility for 2018 returns?

    The client who raised these questions is fairly well-informed about the workings of VA government, so I take his questions quite seriously.

    Link: https://tax.virginia.gov/news/filing-season-update

    Thanks in advance for any input.

    FE
    Last edited by FEDUKE404; 02-06-2019, 10:55 PM.

    #2
    Not to give you a short answer but as of this post VA is still out on many issues. Some of which you inquired about.

    Comment


      #3
      Originally posted by TAX4US View Post
      Not to give you a short answer but as of this post VA is still out on many issues. Some of which you inquired about.
      No problem. Your response kinda confirms what my client was saying today.
      So what is your suggestion --- just don't file any 2018 VA tax returns until this matter is resolved?

      FE

      Comment


        #4
        As a follow-up to the above:

        A review of the currently available instructions for the 2018 VA Form 760 shows that the same method (standard deduction or itemized deductions) used on the federal return must be used on the Virginia return.
        I find it rather interesting that, as a simple example, a single person with $4k in property taxes and $5k in charitable contributions (now uses the federal standard deduction) is "stuck" with the $3k Virginia standard deduction.
        Apparently the Virginia legislature is still dealing with issues related to allowable Virginia deductions for those who DO itemize on the 2018 federal return, as noted in my link above. Of course, these days the politicians in the Commonwealth appear to have a few apparently more pressing matters on their plate.
        So, I will still appreciate any input from the Virginia tax pros as this matter unfolds.

        FE

        Comment


          #5
          From what I hear is that Because of the Itemized deductions in 2017 being allowed, VA allowed. Now that the higher stnd on federal is knocking people out of the Schedule A. This forces VA tp to use their standard. This issue causes VA to get a tax increase without having to do anything. Manny TP's will now owe more tax to VA. Then with the SALT cap in place on Federal, will VA follow this rule? Apparently VA has many other issues to deal with now. Just my 2 cents worth. You may have a different take on this.

          Comment


            #6
            Originally posted by TAX4US View Post
            From what I hear is that Because of the Itemized deductions in 2017 being allowed, VA allowed. Now that the higher stnd on federal is knocking people out of the Schedule A. This forces VA tp to use their standard. This issue causes VA to get a tax increase without having to do anything. Manny TP's will now owe more tax to VA. Then with the SALT cap in place on Federal, will VA follow this rule? Apparently VA has many other issues to deal with now. Just my 2 cents worth. You may have a different take on this.
            Your points are noteworthy.
            The biggest hurdle I see for a VA resident is a person who now for 2018 drops back to using the federal standard deduction, and thus is stuck with also using the low VA standard deduction.
            The present skirmish applies only to those who WILL itemize on the federal, and then since they must also itemize on the state return they run up against things (perhaps?!?) such as SALT issues.
            The Commonwealth is indeed a mess these days. I have several friends (not tax clients) who live in the western part of VA and you should hear their comments!
            Thanks for the input.

            FE

            Comment


              #7
              Virginia has had what they call Fixed Date Conformity for years. So every year, they have to decide whether to accept whatever changes the feds come up with or not for the previous year's filing. It may take until the end of the current legislative session since they only meet in the early part of the year.. When they figure it out, it is usually retroactive to Jan 1. They almost always do it eventually except for certain bonus depreciation and some other items. Whatever the IRS allowed, VA did the same. I expect VA to follow that same practice for 2018 returns, but who knows. You HAVE to itemize on VA if you itemize on the fed. You HAVE to take the standard on VA if you take the standard on the fed return. 9 other states do the same thing. (Although NY has de-coupled this year.) I wish they all would decouple, so you can take standard on the fed and itemize on the state. Strategy for some taxpayers: If they wind up with no taxable income, or very little, by itemizing on the fed -- even if it is not as much as $12K or $24K -- it may be beneficial to do so anyway in order to itemize on the state. I have done this in the past, but it always had to be pretty close to capture a benefit by doing so for my clients.. Exemptions were never part of this. VA's have been the same for a number of years, regardless of what the feds allowed on the 1040.
              Last edited by Burke; 02-08-2019, 05:51 PM.

              Comment


                #8
                Originally posted by Burke View Post
                Virginia has had what they call Fixed Date Conformity for years. So every year, they have to decide whether to accept whatever changes the feds come up with or not for the previous year's filing. It may take until the end of the current legislative session since they only meet in the early part of the year.. When they figure it out, it is usually retroactive to Jan 1. They almost always do it eventually except for certain bonus depreciation and some other items. Whatever the IRS allowed, VA did the same. I expect VA to follow that same practice for 2018 returns, but who knows. You HAVE to itemize on VA if you itemize on the fed. You HAVE to take the standard on VA if you take the standard on the fed return. 9 other states do the same thing. (Although NY has de-coupled this year.) I wish they all would decouple, so you can take standard on the fed and itemize on the state. Strategy for some taxpayers: If they wind up with no taxable income, or very little, by itemizing on the fed -- even if it is not as much as $12K or $24K -- it may be beneficial to do so anyway in order to itemize on the state. I have done this in the past, but it always had to be pretty close to capture a benefit by doing so for my clients.. Exemptions were never part of this. VA's have been the same for a number of years, regardless of what the feds allowed on the 1040.
                I understand the Fixed Date Conformity issues. Those usually deal with "differences" such as how to handle bonus depreciation issues and thus apply a suitable "adjustment" on the VA tax return.
                The current mess is essentially politics.
                Agree decoupling would help a lot. But then they also have to deal with tweaking the federal rules, such as SALT issues, for VA folks who itemize.
                Apparently the wise folks in Richmond have just reached some kind of agreement (posting links here can create problems) but the gist of it is they are considering "rebates" later this year (just before state elections!!) to give some money back to the filers. One item is "recalculating" the very low VA standard deduction to lower a resident's state taxable income.
                More fun and games from the Commonwealth!

                FE

                Comment


                  #9
                  Originally posted by FEDUKE404 View Post
                  Apparently the wise folks in Richmond have just reached some kind of agreement (posting links here can create problems) but the gist of it is they are considering "rebates" later this year (just before state elections!!) to give some money back to the filers.
                  Oh, please post link......it's a gov't site?

                  Comment


                    #10
                    Originally posted by Burke View Post

                    Oh, please post link......it's a gov't site?
                    Richmond newspaper. I will try to send link to you via PM.
                    (Don't want to upset the TTB hall monitors any more...)

                    EXCERPT:
                    The agreement adopts the plan the Senate approved last week to give $420 million in refunds next fall to compensate taxpayers for higher state taxes they will pay on 2018 income as an unintended consequence of the Tax Cuts and Jobs Act that President Donald Trump signed more than a year ago.
                    Individual taxpayers would receive $110 and married couples $220 in October...



                    FE
                    Last edited by FEDUKE404; 02-09-2019, 10:36 PM.

                    Comment


                      #11
                      Thanks. I got it. Awaiting details on increased standard deduction and to which year it will apply.

                      Comment


                        #12
                        Well it is done! See Tax Bulletin 19-1 at https://tax.virginia.gov/tax-bulletins.
                        Last edited by Burke; 02-21-2019, 11:02 PM.

                        Comment


                          #13
                          Originally posted by Burke View Post
                          Well it is done! See Tax Bulletin 19-1 at tax.virginia.gov/taxbulletins.
                          Thanks. Looks as if the Virginia folks will now receive a "rebate" just in time for their fall elections!

                          FE

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