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June 05, 2019 | Posted in:

Smaller (or larger) tax refund? Bigger tax bill? Now what?

The first tax season under the Tax Cuts and Jobs Act was a surprise for most Americans. In fact, many who received smaller refunds or owed money think that the new tax laws hurt them. Both
situations can simply mean that you paid in too much or too little tax during 2018. What should taxpayers do now?

 

Here are tips for 2019 to ensure a less uncertain 2020 tax season.

 

1. Change your thinking.

Before you get too upset, compare the total tax on your return to last year. If this year’s number is smaller, then the new tax law helped you. Whether you owed the government, or paid too much and got a refund, it doesn’t really matter. Paying less tax in total is better, right?

 

2. Review your withholding.

The withholding tables changed in February 2018, but few people took the time to review W-4s on file with their employers. Now that the uncertainty is over, revisit your W-4 to see if you need to change your allowances. Keep in mind that calculating the correct number is tricky business. Our sister company, Abacus Payroll Inc., has an online W-4 assistant that can help, or schedule a tax planning meeting with your accountant.

 

3. Miss your gigantic refund?

Ask your employer to deposit part of your pay into a savings account each week, and next April give yourself a refund by withdrawing the cash.

 

4. Make estimated tax payments.

If you have supplemental income, it’s smart to save some of it for taxes. Self-employed individuals likely need to make quarterly tax payments in January, April, June and September to avoid penalties. These payments are often calculated based on prior year taxes, or you can use projections for the current year.

 

Tax reform reminds a lot of taxpayers that no one likes surprises. Set up a tax planning meeting with your CPA.

This article was published in Alloy Silverstein’s Summer 2019 Newsletter. Click here for more content or to subscribe.

 

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