2018 has been quite the year to talk about taxes. Before you get started planning for tax reform’s impact on your 2018 taxes, you still have to file your 2017 tax return before April 17, 2018. We understand that this year might be more confusing with all of the headlines and discussion about the new tax law. Here are answers to some of the most common questions taxpayers have in preparing their 2017 tax return.
A: You’re right, there are a lot of changes in 2018 due to the passage of the Tax Cuts and Jobs Act (TCJA), including changes to the income tax brackets. The simple answer to the question “What should I do?” is to not make any major changes until you finish filing your 2017 taxes. Once you understand your 2017 tax obligation, you are in a better position to plan for 2018 with your accountant and advisor.
However, there are a few things you can start thinking about now. Depending on where you fall in the new income tax brackets, you may want to consider ways to lower your taxable income. This could include increasing your contributions to 401(k) retirement accounts or health savings accounts (HSAs). You’ll also want to make sure your employer has adjusted your federal tax withholding so that you don’t have to wait to receive a large refund (or tax bill) next year. You can review the IRS withholding calculator using your latest pay stub data to make sure the changes are accurate.
A: The penalty per adult is calculated as the greater of either $695 or 2.5 percent of your yearly household income, up to a maximum of $3,264 for individuals or $16,320 for a family of five or more. Note that the penalty is still in place for tax years 2017 and 2018. The TCJA eliminates the penalty for 2019 through 2025.
A: It depends. You won’t pay tax on more than 85 percent of your Social Security income, but how much gets taxed depends on your income bracket. If your combined income is less than $25,000 for the year, you won’t pay tax on Social Security income.
A: Technically, Tuesday, April 17, 2018. However, we highly recommend not waiting until the last minute. Ask for help to get started now, or to file an extension so you have time to complete your tax return later. The sooner you file, the sooner you can get your refund. It usually takes about three weeks to arrive from the date you file. Also, remember you need to keep most tax-related documents for at least three years, so don’t toss your paperwork after you file. Click here for the March and April tax deadline information.
A: While most of the focus is on 2018 change, there are several recent developments that may impact your 2017 tax return. As always, consult with your accountant and advisor for the most up-to-date information and how it pertains to your individual situation.
A: Ask for help. There are numerous scammers who impersonate the IRS during tax season. The real IRS will never contact you via social media, email or text message. In addition, an IRS agent will not contact you over the phone unless you first receive official correspondence in the mail. If you have received a notice in the mail, immediately ask for help to determine how to proceed.
A: If you can make an effort to be as organized as possible prior to your appointment, you and your CPA will be grateful for a smooth tax prep process. In addition to “Common Sense Tips,” the following infographic offers some suggestions to help take time off of your taxes:
It’s Tax Time! 6 Organization Tips to Take Time off of Taxes [Infographic]
If you don’t yet have a CPA, accountant, or advisor to partner with for your 2017 tax return, meet Alloy Silverstein’s accountants and adivsors and fill out a contact form.
The information contained in this newsletter is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance. For more information or for assistance with any of your tax or business concerns, contact our office at 856.667.4100.
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