Our Tax Expert Keith Hiatt, with ‘Breslow, Starling’ Certified Public Accountants in Greensboro, sharing some great insight into a new Tax filing season – filled with new tax law benefits.
Preparing for Tax Day: 3 big changes this year
*Bigger standard deduction: The standard deduction will nearly double for every filer from 2017: $12,000 for single and married taxpayers filing separately, up from $6,350; $18,000 for heads of households, up from $9,350; and $24,000 for married couples filing jointly, up from $12,700.
*Another substantial change is the doubling of the child tax credit to $2,000 per child from $1,000. Taxpayers also can claim a new $500 credit for adult dependents.
3 ways to get ready
*Gather documents: Print out a tax checklist and gather the documents as you receive them, such as W-2s from your employer and 1099s from your bank. Collect any receipts you plan to use to claim deductions for charitable contributions.
*Pull out old returns: Take out a copy of last year’s tax return to help jog your memory on what credits you claimed and deductions you made. This will help you note key changes in your life that may affect your taxes, such as marriage, divorce, a new house, a new baby or retirement.
*Anticipate changes: Use online calculators to help you anticipate your tax situation post-tax reform law. If you estimate you may owe Uncle Sam, you can still fund your IRA – until April 15 – to lower your 2018 taxable income.
NOTE: Important tax dates…
January 28: The IRS will start ‘accepting’ your tax returns
January 31: Deadline for employers to mail out W-2 forms and businesses to send 1099 statements, which report non-employee compensation, bank interest, dividends and distributions from a retirement plan, and help calculate your total taxable income.
March 15: Heads up incorporated workers! Tax returns for LLCs and S-corps are due.
April 15: This is the last day you can file your taxes electronically or postmark your paper taxes.
Breslow, Starling, Frost, Warner, Boger and Hiatt
Certified Public Accountants 3825 W. Market Street, Suite 200, Greensboro, NC 27407 336-292-6872
Nine Ways To Maximize Your Tax Refund: Preparing for Tax Day. Do the words “tax return” send shivers down your spine because you always end up with a gigantic headache and little or no tax refund at the end? Maybe the problem is in preparation and planning – or lack of it. Tax law is complicated, and it takes a coordinated, sustained effort to optimize your refund. Let these nine tips help you acquire the best refund possible.
Don’t Delay –The IRS doesn’t start processing forms for the 2018 tax year until January 28, 2019, but that doesn’t mean you have to wait until right before this year’s deadline of April 15. If you need motivation, think of what you can do with a tax refund windfall. The sooner you file, the sooner you can put your refund to use… assuming the partial government shutdown doesn’t slow refund processing down. Two other reasons to avoid procrastination: the earlier you begin, the more time you’ll have to locate any missing documents and data; and the sooner you file, the harder it is for a tax identity thief to target you.
- Contribute to Retirement Plans –Retirement plans allow you to build a tax-deferred nest egg while lowering your taxable income for the year. Max out your 401(k) and traditional IRA contributions if you can. The limits for a 401(k) are $18,500 plus an extra $6,000 catch-up contribution if you are over 50. IRA limits are $5,500 with a $1,000 catch-up contribution.
- Review Possible Deductions –The Tax Cuts and Jobs Act (TCJA) raised the standard deduction in 2018 and placed new limits on some deductions, making it less likely that itemizing makes sense. Review the remaining itemized deductions in the Schedule A instructions, and look for the “above the line” deductions on Form 1040 – these deductions subtract from your adjusted gross income and you don’t have to itemize to take them.
- Check Qualification for Tax Credits –Pay special attention to any tax creditsfor which you qualify. Tax credits are even more valuable than tax deductions because they subtract directly from your tax bill, while tax deductions only reduce your tax bill in proportion to your tax rate.
Refundable tax credits are the most valuable of all, as they can provide a refund in excess of the tax that you owe. Most credits, like the Earned Income Tax Credit, are targeted at helping low-income taxpayers who need the most help.
- Get Organized –Do you have all of your tax documentsin order? Start with the forms necessary for this year’s filing – W-2 forms from employers, all varieties of 1099 forms that show income and assets, your 1095 form for proof of health insurance, and last year’s tax form. If you plan to itemize deductions for things like charitable contributions, make sure you have the necessary receipts and paperwork to back up the deductions.
- Use Helpful Software – If you plan to do your own taxes, there are many fine software packages to choose from that can guide you through the filing process. Check into your options, look for online reviews to see how previous customers have fared, and select the software option that best fits your needs and cost limitations. If you can’t afford any software, the IRS Free File system may be able to help.
- Review Changes –Take the time to review the summary of the changes made by the TCJA in the “What’s New” section of the Instructions for Form 1040 and see how they will affect your 2018 filing.
- Adjust your Withholding –Review your withholding rate to make sure you are paying the right amount of taxes throughout the year. That’s especially important given the new tax brackets that took effect in 2018. If you miscalculated your new tax bracket last year, change your withholding rate now to correct it for tax year 2019.
While a refund is nice, don’t go overboard in your withholding. A refund is essentially the government returning your overpayment in taxes throughout the year. You could be putting that money to work yourself instead of letting the government hang on to it tax-free.
- Seek Help If Necessary –Tax laws can be confusing. If your tax situation is complex and you don’t have the time, patience, or ability to maximize your tax return, seek the advice of a competent tax professional– but do your research first and be skeptical of broad claims. Anybody who can guarantee you the highest refund without reviewing your individual situation is probably stretching the truth.
Armed with these tips, you can prevent those tax-time headaches with the best cure possible – a nice fat tax refund. It’s more effective than aspirin.
Failing to pay your taxes or a penalty you owe could negatively impact your credit score. You can check your credit score and read your credit report for free within minutes by joining MoneyTips. This article was provided by our partners at moneytips.com.
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