2017 ULTRATAX/1040, v.2017.2.3 User Bulletin …

1 UltraTax CS Copyright 1991-2018 by Thomson Reuters. All rights reserved. Page 1 2017 ULTRATAX/1040, User Bulletin : Update January 18, 2018 This user Bulletin explains changes related to this update of UltraTax/1040 and UltraTax/1040 Client Organizer. SPECIAL INFORMATION Start of 2018 Filing Season The opening day for filing 2017 individual returns electronically is scheduled for Monday, January 29, 2018, see IR-2018-1. The UltraTax/1040 Electronic filing utility will be included on the January 25, 2018 update. That update will allow the electronic file to be created, and returns that pass error checking can be transmitted to Thomson Reuters. We will hold and then transmit the returns to the IRS beginning on January 29, 2018. The stockpiling rule (from IRS Publication 1345) does not apply to this situation. Since the IRS will not process paper tax returns before the announced start date, there is no advantage to filing a paper return before the opening date.

2 Therefore, filing paper returns before the IRS can receive such returns will slow the return s processing. The fastest and best option for getting refunds is to use the IRS e-file program with direct deposit. Refer to User Bulletin , Electronic Filing Setup Procedures for more information on setup issues and other information you may need to address prior to electronically filing 1040 returns with UltraTax CS. To learn more about the optional electronic signature (eSignature) feature that you can use for taxpayer signature on form 8879, IRS e-file Signature Authorization, form 8878, IRS e-file Signature Authorization for form 4868 or form 2350, and form 114a, Record of Authorization to Electronically File FBARs for a nominal per envelope fee including the Knowledge-based authentication (KBA) as specified in the IRS requirements, refer to User Bulletin , eSignature Processing Procedures for more information and processing steps for the eSignature feature.

3 Disaster Tax Relief and Airport and Airway Extension (DTRAAE) Act of 2017 Several tax provisions were introduced with the Disaster Relief and Airport and Airway Extension (DTRAAE) Act of 2017. As a result, many affected 2017 tax forms are awaiting further updates from the IRS. Thomson Reuters is closely monitoring the progress of these form changes and is working with the IRS to determine the nature and scope of the impact for 2017 tax return processing. Updated information regarding processing of these forms for paper and electronic filing will be provided as it becomes available from the IRS. UltraTax CS Copyright 1991-2018 by Thomson Reuters. All rights reserved. Page 2 Forms, schedules, and worksheets All forms, schedules, calculations, and supporting worksheets are provided with this version of UltraTax/1040. However, at the time of update many tax forms, instructions, IRS publications, and related schedules and worksheets were not available in their final format from the IRS.

4 As a result, the forms provided are based on either a 2017 draft or a prior-year version. Thomson Reuters highly recommends you do not file any individual returns until final approval has been received. form approval status You can use the UltraTax CS Home Page to determine the approval status of 1040 forms. To do so, click the Product Information link, click the 1040 tab, click the Federal link, and then click the form status link. Also, UltraTax CS generates a diagnostic message for each return that requires a form not yet approved. To view these messages in the Diagnostics pane, choose View > Diagnostics when you have the return open in UltraTax CS. Updates to form approval status information are distributed via CS Connect. form W-4, Employee s Withholding Allowance Certificate Due to the Tax Cuts and Jobs Act (TCJA) signed into law on December 22, 2017, the IRS has not published the final version of form W-4, Employee s Withholding Allowance Certificate, as of this update.

5 The IRS issued Notice 1036 on January 11, 2018, which includes updated income tax withholding tables. Until form W-4, Employee s Withholding Allowance Certificate, is released by the IRS, employers and employees should continue to use the 2017 version of form W-4. Tax Planning Tools Analyze tax strategies and easily communicate results with Planner CS. You can review countless tax strategies for multiple years, from simple to complex, such as strategies to minimize your client's tax liability or to avoid alternative minimum tax, and you can easily analyze tax planning needs for your clients. To learn more about Planner CS or see it in action, visit Important Information Regarding UltraTax CS 2017 e-filing IRS to Enforce ACA Health Coverage Reporting on Electronically Filed 2017 Returns The IRS has informed taxpayers and practitioners that it will not accept electronically filed 2017 tax returns that fail to address the Affordable Care Act's (ACA's) health coverage requirements.

6 In addition, paper returns that don't indicate health coverage may be suspended pending the receipt of additional information, and any refunds may be delayed. As such, taxpayers must indicate whether they and everyone on their return had minimum essential coverage, qualified for an exemption, or are making an individual shared responsibility payment for 2017. The IRS and the National Taxpayer Advocate have determined that rejecting silent returns at the time of filing is the least burdensome approach for the taxpayer. The IRS's latest statement on the ACA's health care reporting requirement can be accessed at Bank Account Verification In accordance with the Trusted Customer Standards IRS Security Summit requirements, bank account information must be verified by the taxpayer each year. UltraTax/1040 has several options to help verify the information and a Taxpayer verified all bank information by: input field on Screen Bank in the General folder to indicate how it was verified.

7 UltraTax CS Copyright 1991-2018 by Thomson Reuters. All rights reserved. Page 3 Driver s License or State ID information Federal Screen IDAuth and Organizer form IDAuth in the Electronic Filing folder are used for gathering driver s license or state ID information to help the IRS and state revenue agencies combat identity theft and fraudulent return filing. The IRS will not reject a return if this information is not included or a response is not entered, however, most states reject returns that have no response entered in the form of identification field on Screen IDAuth. The presence of the identity authentication information will assist the agencies in processing returns. At some point, more agencies may start requiring identity authentication under certain circumstances. Note that some states require driver s license or State ID information. Refer to state-specific User Bulletins, the State Electronic Filing Guide, or contact your state revenue agency for more information on the identity authentication information required by certain states.

8 Tax Projection Worksheet The comprehensive 2018 Tax Projection Worksheet (TPW) is available with this update. Provisions of the Tax Cuts and Jobs Act (TCJA) have been incorporated into Tax Projection Worksheet calculations as described below. The Tax Projection Worksheet includes the following supporting worksheets: Traditional IRA Deduction Qualified Business Income Deduction (QBID) New this year! Child Tax Credits New this year! Tax Using Capital Gains Rates Alternative Minimum Tax Alternative Minimum Tax, Line 53 Alternative Minimum Tax Exemption Foreign Earned Income Tax Excess Capital Gain Hospital Insurance Tax Individual Responsibility Projected Versus Actual Comparison Reconciliation Worksheet Projected Taxable Income & Tax Processing Tip: Use code 8 in the form 1040-ES 2018 declaration field in Screen Est in the Payments folder to calculate next year s estimates based on the Tax Projection Worksheet.

9 Tax Cuts and Jobs Act (TCJA) was signed into law on December 22, 2017. TCJA is broad in nature and many provisions become effective in tax year 2018 and sunset after 2025. The following changes, related to the individual provisions of the bill, and effective in tax year 2018, have been implemented as follows into the Tax Projection Worksheet: New ordinary income tax rates of 10%, 12%, 22%, 24%, 32%, 35% and 37%. 2017 tax rates are 10%, 15%, 25%, 28%, 33%, 35% and Capital gains rates retained the existing break points which have been indexed for inflation. The Tax Projection Worksheet, Capital Gains Tax has been updated with the indexed rates. Increased standard deduction UltraTax CS Copyright 1991-2018 by Thomson Reuters. All rights reserved. Page 4 Alternative minimum tax was repealed for corporations but not individuals. Individual exemptions and phase out amounts have been increased. The Tax Projection Worksheet Alternative Minimum Tax has been updated as follows: MFJ/QW exemption increased from $86,200 to $109,400; phase out threshold increased from $164,100 to $1,000,000 MFS/HOH/Single exemption increased from $55,400 to $70,300; phase out threshold increased from $123,100 to $500,000 Personal exemptions are suspended for tax years 2018 through 2025.

10 No personal exemption amounts are projected for the next year. Repeal of the domestic production activities deduction. No domestic production activities deduction will be included in the projected 2018 other adjustments amount. Kiddie tax simplification no longer requires the child s unearned income to be taxed at their parent s rates; they will be taxed using Estate rates. No 2017 taxes from form 8814, Parent s Election to Report Child s Interest and Dividends will be projected for next year. The AGI floor used to calculate the itemized deduction for medical and dental expenses is reduced to for all taxpayers for 2018. The itemized deduction for state and local taxes is limited to $10,000 ($5,000 for a married taxpayer filing separately) for the aggregate of all income taxes, sales taxes, real estate taxes, personal property taxes and other taxes. Taxes imposed for any tax year after 2017 cannot be claimed as a deduction, even if prepaid in 2017.