Whatever one chooses to call them–tax cuts or tax reform–there may be some big changes to your tax return in the future. Below are some key takeaways to consider when developing a tax plan to minimize what could be steep tax increases in the future:
If you itemize your deductions (file your tax return with a Schedule A) you may bear the brunt of the tax increases. State & Local Tax (SALT) deductions are now capped at $10,000. Likewise, if you recently purchased a new home or property, the mortgage interest is being capped at the first $750,000 of the principle. Deductions for interest on home equity, job expenses and certain miscellaneous deductions have being eliminated entirely; this includes union dues, uniforms, work supplies, investment advisor fees & tax preparation fees to name a few.
What this all means is that taxpayers need to take a real close look at whether it is still beneficial to itemize deductions. In some cases, it may be better to take the standard deduction. In others, it may be possible to take 2018 expenses this tax year. Every taxpayer’s situation is unique. If you feel these changes will have a negative effect, we suggest you seek out a tax professional to develop a comprehensive tax savings plan.
The IRS has recently released new withholding table guidelines. In a nutshell, the IRS is guiding employers to REDUCE the amount of withholding for their employees. This essentially will INCREASE the amount of employee’s take home pay. However, if you normally get a tax refund each year, it’s important to remember that the size of your refund is basically determined by the amount you direct your employer to withhold. While it’s nice to see a larger weekly paycheck, it might not be as nice to “kick the can down the road” and see a significantly smaller refund or worse–to owe money to the IRS.
The IRS is putting the onus on you–the taxpayer–to make sure your withholding–and thus your refund–is correct. R&G Brenner suggests you consult with your employer’s Human Resources or Payroll department to determine what your withholding was last year, and what it will be this year. It should be possible to increase your withholding to ensure that your refund amount remains in an area you are comfortable with.
If the above changes aren’t enough to pull your hair out, why not throw in some delays to boot: The IRS is not accepting any returns for filing until 1/29/18. This is the longest delay to the start of tax season in recent history. Furthermore, if you normally file your return with tax credits like the Child Tax Credit or the Earned Income Tax Credit (EITC), the IRS hasn’t even released a date when they will accept those returns; all we know is that it certainly won’t be before 2/15/18. If you can’t afford or simply don’t want to wait this long for your refunds, R&G Brenner has introduced two new SAME DAY refund advance products:
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The shutdown of the U.S. Government has added a new wrinkle to all the above issues. According to the FY2018 Lapsed Appropriations Contingency Plan (During the Filing Season) the start of the tax filing season–1/29/18–will proceed as planed. However, if the shutdown lasts more than 5 days, these plans may be reassessed. In other words, as of this writing–1/22/18–the IRS has 3 more days before changes can be made.
Watch this 3 minute video which does a pretty good job of explaining the upcoming tax changes.
Visit our website for more information regarding any tax related matter, or simply click “Book Appointment” to schedule a meeting with an experienced R&G Brenner tax professional and we’ll help you navigate this new tax environment.