![]() Given all the changes the TCJA made, the IRS estimates the average time to complete an individual income tax return will fall by 4 to 7 percent. Now, under the Tax Cuts and Jobs Act, it would be more advantageous for this couple to take the standard deduction of $24,000, as it allows them to deduct an extra $10,000 and eliminates the need to spend time and energy collecting receipts and completing Schedule A of Form 1040. To understand why a bigger standard deduction is a simplification, consider a married couple who under previous law would have taken $14,000 in various itemized deductions. The process of deciding whether to itemize is complex it requires maintaining records of various expenses, determining which can be deducted according to Internal Revenue Service (IRS) rules, and weighing whether all the deductions add up to more than the standard deduction. These itemized deductions include expenses such as mortgage interest payments and charitable donations. They can either claim the standard deduction, or they can forgo the standard deduction and deduct a wide range of expenses instead. Recall that when households file their individual income taxes, they have two options for deductions. The Joint Committee on Taxation estimates that the number of filers who itemize will fall from 46.5 million in 2017 to just over 18 million in 2018, meaning that about 88 percent of the 150 million households that file taxes will take the increased standard deduction. Thus, millions of households will no longer need to go through the complex process of itemizing their deductions. The Tax Cuts and Jobs Act increased the standard deduction from $6,500 to $12,000 for single filers and $13,000 to $24,000 for taxpayers who are married filing jointly. Now, nearly 29 million more households will be better off taking the standard deduction instead of itemizing deductions, meaning they will have a much simpler tax filing process. The TCJA lowered individual income tax rates, and nearly doubled the standard deduction. In an era when the use of cash is on the decline and information can be shared rapidly at little cost, it is time for policymakers to institute a more modern tax enforcement regime for small businesses.As the House of Representatives this week considers a bill that would make the individual reforms of the Tax Cuts and Jobs Act (TCJA) permanent, one important change to keep in mind is the increased standard deduction. Although this Article focuses on the gig economy as an illustration of how the workplace has evolved in recent years, the proposals could apply more broadly to taxation of small, individually run businesses. Second, this Article proposes a "standard business deduction" for gig workers, which would eliminate the need to track and report business expenses. First, Congress should create a "non-employee withholding" regime that would allow online platform companies such as Uber to withhold taxes for their workers without being classified as employers. ![]() This Article proposes two reforms that would drastically reduce tax compliance burdens for this new generation of small business owners, while simultaneously enhancing the government's ability to collect tax revenue. To the surprise of many gig workers, the tax law considers them to be "business owners," which subjects them to onerous recordkeeping and filing requirements, along with the obligation to pay quarterly estimated taxes. Due to advances in technology like mobile applications and online platforms, millions of American workers now earn income through "gig" work, which allows them the flexibility to set their own hours and choose which jobs to take.
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