We are now operating under the tax rules of the Tax Cuts and Jobs Act (TCJA). It has completely altered the Federal Income Tax landscape. Don’t let it catch you by surprise!
It is important to review your taxes at this mid-year 2018 and make any changes to avoid any worries.
Estimate your 2018 tax.
Marital status, number of kids, how you make a living, tax breaks you have learned to rely on, and other factors all affect your tax bill under the new law. Your first step is to estimate your 2018 tax bill WITH CONFIDENCE based on all these numerous revisions.
Check your withholdings.
Withholdings from paychecks, retirement pay, etc. have been automatically lowered under TCJA. This may be the wrong course of action for you! Your taxes may actually be increasing under the new tax law and withholdings should be increased, not lowered. Changes in withholdings may be required.
Review your Estimated Payments.
It cannot be emphasized enough that TCJA provides one of the most sweeping changes in years. The standard deduction, personal exemptions, tax credits, and deductions have all changed, if not eliminated.
You could easily be vastly overpaying or underpaying your 2018 estimated taxes! [The assumptions under which you put together your original 2018 estimated tax payments may be incorrect; It may be based on old law or incomplete information about the new law].
Estimated tax payments need to be reviewed and revised to avoid any mishaps.
Avoid Consequences of Poor Tax Planning Under New Tax Law.
What happens if I do not make an extra effort to review my income tax situation at the mid-year point?
One result could be a large balance due when you file. Now only would one have the stress of having to pay a balance due, but you may have to pay a penalty for underpayment of tax.
Another result could be bloated refund. This is a result of paying too much tax through withholding or estimated taxes. You endure stress waiting for the refund to arrive. [Sometimes for months now because of governmental budgetary problems]. There are also lost opportunities, such as investing or saving for a vacation, because too much cash is tied up in a refund.
Meet with a good Tax Advisor.
Without keeping track of the ramifications of the new tax law, you may miss out on ways to save on your taxes – from understanding the best way to use the new deductions and credits to making sound financial decisions during the year to minimize your tax burden.
This is how a good Tax Advisor can help.
A good Tax Advisor can address your concerns about how the new tax law affects you. He or she can estimate your 2018 tax bill WITH CONFIDENCE, determine how to minimize your tax burden, and will leave you with no worries when you file your 2018 tax return.
It has been two or three decades since our country has undergone such major tax law changes. Do not underestimate its complexity or how it radically impacts your tax burden. Take the time now, at this mid-point of 2018, to review your income taxes, put a plan in place, and have peace of mind.
John J. Kasperek, EA, is genuinely concerned about the impact of the new tax law. His goal is to prompt people to take a serious look at where he or she stands under the new tax law.