8 Things to help you with preparing for 2018 taxes
- Review your filing status –
Your filing status can affect how much you owe in taxes each year, and whether or not you have to file at all. Consider whether your filing status will change during the year.
For example, if you’re single but planning to get married by Dec. 31, 2018, you may choose to file a joint or separate return with your spouse when you file your 2018 taxes.
Alternatively, you may be filing as a single taxpayer if you expect to get divorced during the year, or as head of household if you’re single and having a child or taking on another dependent.
- Looking Back to your 2017 Return –
Look back at filing your 2017 tax return and thing about areas that were problematic or extra stressful. Then think about how you can alleviate that stress for next year.
- Decide how much Tax You Want withheld –
Per IRS data, nearly three-quarters of the individual tax returns filed in 2017 resulted in a tax refund, with an average refund of $2,782. If you received a big refund on your 2017 tax return, it may mean your employer is withholding too much tax from your paychecks. Decreasing your withholdings might give you access to more of your money throughout the year.
In addition, the Tax Cuts & Jobs Act changed the rate at which taxes are withheld from paychecks.
In light of the above, it’s a good idea to do a “paycheck checkup” to determine whether you are withholding too much or not enough to cover your Income Tax Liability. You can use the IRS withholding calculator on IRS.GOV to do so: https://apps.irs.gov/app/withholdingcalculator/
- Save documentation for Deductible Items –
If you own a business or plan to itemize your deductions, you should hold onto your receipts and other documentation for eligible expenses. You won’t need to submit your receipts with your tax return, but you may need to substantiate your expenses down the road if the IRS audits your return.
- Consider saving more for retirement –
If you have a 401(k) or traditional IRA, you may get a tax break by contributing more money to your retirement account. That’s because contributions you make to these accounts are typically deductible on your tax return.
- Plan for Estimated Tax –
Underpaying your taxes throughout the year can have negative consequences. If you expect to owe at least $1,000 in taxes when you file, the IRS generally requires that you make estimated tax payments throughout the year. This is especially important for business owners or self-employed individuals who generally don’t pay income taxes on their earnings (as do W-2 wage earners).
Note that you may need to work with a tax accountant to determine how much to set aside and pay each quarter.
- Familiarize Yourself with New Tax Rules!
The Tax Cuts and Jobs Act that took effect in December 2017 made big changes to the US tax code.
The Tax reform means two things for you.
- Some of the tax breaks you might have taken advantage of in the past are gone.
- There may be some new tax breaks you can use when preparing for 2018 taxes.
Contact Wicks Emmett today and start planning for your 2018 tax return. Now is the time to get your ducks in a row to maximize your tax savings.