2018 saw sweeping changes in our Federal Income Tax Laws, but this year we will be living in real time with the ramifications of those new laws. In light of all that change, below are five key issues to pay especially close attention to this tax season.
- Expect delays due to new forms. It’s estimated that as many as 450 forms have needed revision in order to take all the tax law changes into account, including the 1040 itself, which is now completely revised for all of us as a short form. Make no mistake – short doesn’t mean simpler! It just means different. And because so many forms have been redesigned but not actually put into play yet, we’ll be testing them in real time as taxpayers. Expect glitches and delays.
- Don’t be shocked if your typical results are vastly different this year. Because the withholding tables changed in early 2018, and without regard to how the new laws actually impacted you personally, many taxpayers may find themselves owing taxes. If you took time this past year to check in and made any warranted changes to your withholdings, it will make filing this year easier. For those who did not, be prepared for possible changes and expect the unexpected.
- Consider your state or city income tax changes. For example, I live in California and my state did NOT conform to Federal tax law changes. That means that taxpayers are basically experiencing two unique and non-integrated taxation systems. If you haven’t already, work with your tax professional to determine what steps you need to take to maximize the best strategies afforded to you within both systems. There may be disadvantages for one compared to the other.
- Planning for 2019 taxes should start now. When reviewing your 2018 return, look for opportunities to benefit from the tax law changes or to mitigate any negative impacts regarding laws that didn’t pan out in your favor. One example would be for retirees over the age of 70 ½ who are able to direct up to $100,000 of their annual Required Minimum Distributions (RMD) to charity tax free and still have it count toward their RMD each year. Leave no stone unturned in your quest for helpful tax planning ideas.
- See your advisor as early as possible. After reading these thoughts you may think that the last thing you want to do is file early – and that may be wise given the number of technical corrections and glitches we may encounter. However, it makes great sense to work on your taxes as early as possible, even if you decide to wait to file, so that you can get a sense of whether you will owe or receive a refund. Not only will this be helpful to you as you finish your return for 2018, but you will need this information for the following year. Using what you learn, review your current and planned withholding and/or estimated tax payments for 2019 now so you can modify your cash flow planning if needed.
With the impacts of the Tax Cuts and Jobs Act taking full effect this tax season, 2019 may become the most talked about tax filing time in a generation. If ever there was a tax year for “eyes wide open” planning, this is it!
Collaborate with your tax professionals and your CERTIFIED FINANCIAL PLANNER™ professional to be sure you are optimizing all your opportunities and taking all appropriate new laws into account as you move forward this year. Doing so will allow you to file your taxes in confidence and with peace of mind.