Take now these steps to avoid surprises with tax in 2019
An article presented by paystubmakr.com
Now is the best time to be prepared for the next tax return and make your tax bill smaller.
The 2018 mid-year is the time to plan you tax strategy. Accountants and tax consulting people are struggling with the rain of changes from the Tax Cuts and Jobs Act.
The new tax law is coming with sharp limits to Itemized Deduction and overhaul of the Tax withholdings that effect your salary.
There is a makeover on your tax return Form 1040: it is postcard size and six worksheets filer that you will need to go through for your deductions and credits.
You can read and learn how different in form and terms are the new 1040. The New Postcard-Sized 1040 Differs From Your Current Tax Return
Billow, we will list the planning areas that you will need to review with your accountants for this summer.
Your withholding
The IRS overhauled the tax withholding tables, under the new law which employers use and the Form W-4 too. The change will determine how much tax you will need to withhold from your wages according to the allowances you can claim and your paycheck total. Figures that will be shown on your paystub.
You can check your withholding here Tax withholdings
If you withheld too much, you would have it back on the April refunds, but if you were too short you own to the IRS! It can be penalized, so you better be careful with it.
Before the last tax reform, It could be a good idea to withhold less if you used the itemized deductions.
As now the standard deductions are $12,000 for singles and $24,000 for married-filing-jointly, there is no longer the same advantages in withholding short.
“Paying estimated taxes is one way to make sure you’re giving the Internal Revenue Service enough money during the year to avoid owing a lump sum at filing time – or worse, incurring penalties. Generally, people who have incomes that aren’t subject to tax withholding should consider making estimated payments.” Wrote William Perez at The Balance article about Tax Penalty “
You can use the IRS’s withholding calculator to learn what are your options for withholding your payroll taxes.
Itemized deductions
Standard deductions were increased by the new tax code, but it constrained many itemized deductions. The changes include the $10,000 SALT deduction that can be claimed IRS Throw salt in the SALT-Deduction-limit Wound And the elimination of miscellaneous itemized deductions as investment fees and not reimbursed employee expenses.
Jeffrey Levine words on his article on Forbes
“Yesterday, August 23, 2018, the IRS released new proposed regulations(technically, they are amendments to existing regulations) to deal with States’ recent attempts to circumvent the state and local income tax (SALT) deduction limit that was put into place by the Tax Cuts and Jobs Act. In short, the proposed regulations amount to a giant middle finger to blue states (whether you think that’s good, bad, or indifferent is largely a matter of personal political preference, as well as geography), and effectively eliminate the strategy of donating to State-run “charities”, and simultaneous receiving a credit against state taxes, and a deduction for a charitable contribution for federal income tax purposes”.
Look with your accountant on Schedule A into the list of itemized deductions and plan your strategy.
Investment expenses
With the new law, you can’t deduct them review your investment fees.
Investment with custodial fees, trust administration fees and other expenses that are related to taxable income are not deductible under the new tax law.
Traditional IRA fees could not be taken as a deduction for standard IRA fees. Under the old law, you could use other sources to pay expenses and take the deduction.
Under the new tax code, it needs a decision, when your IRA grows fast on a long horizon, you better think of using outside source of money for paying the fees.
Shorter time horizon
When you’re in conservative investments and your time horizon is shorter it is better to deduct the fee directly from the IRA
Taxable account dollars can be used to pay your Roth IRA’s costs Investment Fees Are Not Deductible But Borrow Fees Are leave Roth IRA as a reserve of tax-free and growing saving for your retirement
Charitable giving
If you are inclined to be charitably though short of surpassing the standard deduction you may consider making two years donation for 2018 so you will be able to go over the barrier and itemize.
Bunching charitable donations after the new tax law By Sarah Lyon, Ph.D. Telle us the following:
“Individual taxpayers, who have two options when they file their personal federal income tax returns — take a standard deduction or itemize deductions — usually select the option that reduces their overall tax liability the most. Under P.L. 115-97, known as the Tax Cuts and Jobs Act, the standard deduction available for taxpayers became much larger — almost twice what it was limits in place on deductible state and local taxes (SALT, including real and personal property taxes, state and local income taxes”
Over 70 and half years old consider transferring minimum distributions from a traditional IRA to a qualifying charity.
We are calling it Qualified Charitable Distribution; this allows you to meet the charitable goals for your RMDs at the same time with no incurring income tax Learn About Qualified Charitable Distributions
William Perez mention this on Required Minimum Distributions
“If you have a traditional IRA, you must begin taking required minimum distributions (RMDs)
when you reach age 70 1/2 even if you neither need nor want the money at that point in time. When you take these distributions, they’re taxable at ordinary income rates—whatever tax bracket you’re in that particular year.”
Paystubmakr.com thank you for reading this article. We hope that you enjoyed it and learned new things for your business.