The Foreign Service Journal, January-February 2019

68 JANUARY-FEBRUARY 2019 | THE FOREIGN SERVICE JOURNAL AFSA NEWS The American Foreign Service Association is pleased to release this year’s Tax Guide. The annual AFSA Tax Guide is designed as an informational and reference tool. This 2018 guide summarizes many of the tax laws that members of the Foreign Service community will find useful, including changes mandated by the Tax Cuts and Jobs Act of 2017. Although we try to be accurate, many of the new provi- sions of the tax code and the implications of Internal Rev- enue Service regulations have not been fully tested. There- fore, use caution and consult with a tax adviser if you have specific questions or an unusual or complex situation. For 2018, “all income from whatever source derived” must be reported by U.S. taxpayers worldwide. Adjustments, deductions and credits remain matters of “legislative grace.” It is important to know more about those statutes, regula- tions, forms and instructions, which are almost always more technical than this summary. Accordingly, AFSA recommends following up with IRS product pages for each form and publication mentioned within this guide. The IRS designed these as extensions of the PDF forms and instructions, and they include links to prior versions. Always check the applicability and “last reviewed” dates of these resources. Even then, some credits, deductions or other calculations (e.g., depreciation, foreign asset reporting, or a 1031 exchange) should only be done by a professional competent in that area. We begin with the April 15, 2019, deadline for filing 2018 individual income tax returns (Form 1040 plus applicable schedules, worksheets and other necessary forms). A discussion of extensions and the new, shorter 1040 follows. Next, we provide the marginal tax brackets and rates for 2018 income, standard deduction and personal exemption. We’ve added a section on the child tax credit to complete the story about the increase of the standard deduction and elimination of the personal exemption. Readers will also find information about relocation expenses, the foreign earned income exclusion and foreign asset reporting. There have been changes to the law regard- ing various itemized (and other separately claimed) deduc- tions. The qualified business interest deduction is new to the tax code. Personal residence-related tax benefits have also changed; a more general discussion of “basis” should help readers with any large assets, not only houses. News about gifts, retirement and estate tax planning, as well as a full Circular 230 notice, round out the federal section. That is followed by the state-by-state guide, which includes infor- mation on state domicile, income tax rates and retirement incentives. AFSA Senior Labor Management Adviser James Yorke ( YorkeJ@state.gov) , who compiles the Tax Guide, would like to thank Sam Schmitt, Esq., of the EFM Law Company, for preparing the section on federal tax provisions; and Chris- tine Elsea-Mandojana, CPA, of Brenner & Elsea-Mandojana, LLC, along with Shannon Smith, Esq., and Hallie Aronson, Esq., of Withers Bergman, for their contributions to the sec- tion on foreign accounts and asset reporting. Filing Deadlines and Extensions The deadline for filing 2018 individual income tax returns is April 15, 2019. Anyone posted abroad is allowed an automatic two-month extension to file. To use it, write “taxpayer abroad” at the top of your 1040 and attach a statement explaining that you are living outside of the United States, and that your main place of business or post of duty is also outside the United States and Puerto Rico. An additional automatic extension may be obtained by filing Form 4868. There are no late-filing or late-payment penalties for returns filed and taxes paid by the respective extension dates (June 17 and Oct. 15), but the IRS will charge interest on any amount owed fromApril 15 to the date it receives payment and late payment fees. 2018 Federal and State Tax Provisions for the Foreign Service