When it comes to taxes, April 15, 2019 marks the end of the year, and one that brings many changes with the new Tax Cuts and Jobs Act that has significantly altered the U.S. tax code.
If you have yet to talk to your tax advisor, it’s time to do so and get prepared for the tax reform of 2019.
Although the seven federal income tax brackets remain the same as they did under the former tax law, most taxpayer’s rates have been lowered and the individual tax brackets have experienced changes in their income requirement levels.
An increase in the standard deduction has been applied, while traditional deductions where either eliminated or had new limits built, including the state and local tax (SALT), which means that for the regular taxpayer tax reporting has actually been made easier. However, for higher-income taxpayers it may be the other way around.
An increase in the standard deduction has been applied and traditional deductions were either eliminated or had new limits built, including the state and local tax (SALT). This means that for the regular taxpayer, tax reporting has been made easier. However, for the higher-income taxpayers, it may be the other way around.
Exemptions present a few changes as well due to all personal and dependent exemptions being eliminated. Now, taxpayers who had itemized to take advantage of deductions for large charity donations, high mortgage interest or local taxes may not be able to reach the standard deduction’s higher limit, even though the higher deduction rates are meant to fill that exemption gap.
How to prepare for this new year’s tax reform.
Even though the general tax structure went through significant changes, the actual filing process remains almost unchanged. However, the amount you pay in taxes may have changed so it’s best to prepare for the 2019 tax reform.
The first thing recommended by the IRS is to get a paycheck checkup to calculate precisely the right amount to be withdrawn from your paycheck which can be done through the agency’s tools and resources.
By entering the IRS’ site, you’ll be able to access a calculator that helps you determine if your employer is withholding the correct amounts from your paycheck. By checking details such as your projected gross income, current withholding number, or amount of federal taxes withheld, the calculator then generates an estimation of the taxes you’ll owe or will be refunded for and provide advice on how to change the amount withheld and more.
Visit your tax consultant and ask them for advice on how to reduce your 2018 obligation in 2019 by funding IRAs and other tax-advantaged accounts for 2018 until april 15, so that the money you invest is increased and your taxable income is reduced.
If you are self employed or the owner of a small business, consider setting up a Simplified Employee Pension IRA, which may allow you to deduct retirement contributions from federal taxable income.
Overall, there are many measures you can start taking now to get prepared for the tax reform of 2019, especially if this year your home, job or relationship status experienced changes. You want to ensure you qualify for tax deductions or may owe taxes so that money can be saved asap.
Make periodic assessments of your paycheck withholding so that you can qualify for a refund or lower your tax burden. Always make sure to stay on track of and store every financial record you may encounter so that the filing deadline doesn’t catch you off guard.
As the time gets closer, it’s recommended to contact a professional advisor in order to revise everything, especially with all the changes and modifications made for this filing season.
At Mitchell Advisory Company, we are waiting for your call. Let us know about your specific situation so we can go through it and recommend the best possible set of actions for you and your business.