It feels like our office just finished with last tax season and we are already planning for the next one!
We have had several months to digest the changes brought by the Tax Code and Jobs Act passed last year, so I want to take this opportunity to not only help you plan for the upcoming year, but also help maximize your 2018 return.
Tax Rate Changes
Both individual and corporate rates have changed. The maximum individual rate is reduced to 37% and the corporate rate is now a flat 21%.
Standard Deduction Increases
Joint filers this year receive a standard deduction of $24,000 this year (the amount in 2017 was $12,700). The standard deduction for heads of household increases to $18,000 and single taxpayers (including married, filing separately) can claim a standard deduction of $12,000. If you typically claim the standard deduction, chances are your tax bill will decrease. The new tax law suspends the deductions for personal exemptions, however the larger standard deduction, combined with the lower tax rates and an increased child credit, may result in less taxes.
If you usually itemize deductions, the Tax Code and Jobs Act eliminates or limits many of these deductions. You will no longer be able to deduct:
- State income tax and property taxes above $10,000 per year in total.
- Certain alimony payments will no longer be deductible by the payer.
- Moving expenses (with an exception for certain military).
- Employee business expenses such as mileage, travel, entertainment, home office expenses, union dues, tax preparation fees, and investment fees, among others.
- Mortgage interest beyond interest on $750,000 of acquisition debt, if you purchase a new home.
- Mortgage interest paid on equity debt (this is no longer deductible for any taxpayers).
For those who are anticipating a higher tax bill this year, there are still steps you can take to offset these changes.
- Max out your retirement plan by increasing your contributions to your 401(k), IRA, or other retirement plan to reach your maximum contribution amount. You generally have until December 31, 2018 to contribute to a 401(k) and until April 17, 2019 to contribute to an IRA for the 2018 tax year.
- Use stock losses to offset capital gains by selling underperforming investments in order to generate a capital loss by the end of the year. This could help offset any gains you get from selling stocks that are performing well.
- Fund a 529 education savings plan. This savings plan allows you to give a tax-free gift of up to $15,000 per beneficiary of any age annually without having to file a federal gift tax form.
- Make tax-free gifts of up to $15,00 per year each to as many family members as you like without reporting it to the IRS. Generally, once the gift is made, your estate will not pay estate taxes on it and it will not be considered taxable income for the recipient.
- Donate to your favorite charity to take advantage of the new deduction limit, up to 60% of your adjusted gross income (was 50% in 2017).
Since income taxes are on a pay-as-you -go basis, either through withholding from your wages and/or pensions or as quarterly estimated tax payments on other income, we recommend every taxpayer that owed taxes last year to schedule a review of their withholding or payments to determine if they should be increased.
If you want to take advantage of these tax benefits, most of your changes need to be made prior to December 31. Please call our office if you have any questions or wish to schedule a tax planning appointment.
Tax Identity Theft is a Growing Problem
Every year, we get several calls from people concerned because they have received a call or a suspicious email. Our firm takes your security very seriously and, while we take every precaution to safeguard your information, there are a few things that you can do to help combat this. Please be aware if you:
- Receive any letter from the IRS that does not apply to you, it could mean that someone has filed a false return using either your information or that of one of your dependents. Please bring any letters you receive into our office and we will help you with communicating to the IRS and fix the problem.
- Get an unsolicited call, email or other contact asking you for any financial or personal information, such as account number or social security number. The IRS and most financial institutions do not use email, text or other social media channels to contact you. Contact your bank at their direct number (on the back of your debit card) if you suspect a scammer is trying to steal your information.
- Receive a robocall identifying itself as the IRS and insisting you settle your tax bill. Your first contact with the IRS will be through official correspondence by mail. They will not call you and demand immediate payment or make demands that you pay in a certain way (such as through a gift card or debit card). You can report these calls at the IRS website or by calling them at 800-366-4484.
We urge you to contact our office for advice whenever you receive communication from the IRS or believe you might have been the victim of identity theft.
Looking Ahead to Next Tax Season
This tax season, we are implementing several changes that we feel will help streamline our tax preparation process. Before sending/dropping off your tax documents, please be sure you include:
- A photocopy of Social Security cards for yourself, your spouse, and dependents (if applicable). These copies will be kept on file and you will not have to provide them again, unless you have a name change or a new dependent.
- When you receive your 2018 Tax Organizer, please review the Personal Information page for any changes and include your email, if you have one.
- Please include all tax documents listed in your organizer, as well as any that are new for 2018 when you return your packet. Please be aware that missing or inaccurate information from our customers inhibits our ability to process your return in a timely manner.
- This year, we are including a prepayment option. In order to offer you additional savings, you have the option of paying in advance for your tax return preparation. By paying when you deliver your tax paperwork to us, or at your initial appointment, you will receive last year’s price. If you are mailing your paperwork to us, simply include a check or let us know to call you for payment by marking the box on the green sheet in your packet.
- If your account has an outstanding balance when we receive your tax paperwork, we will require the balance to be paid prior to processing your return. As a reminder, payment is due at the time of pickup, unless you prepay, and all returns will be held in our office and will not be filed until payment is made. Please let our office know ahead of time if you need to make payment arrangements*. *Payment plans subject to a monthly installment fee
- Our website has been redesigned with customer service in mind. Our Customer Help Center (located under the Services tab) includes links to some of our most requested information as well as a downloadable copy of the 2019 Tax Organizer and a Calendar with important tax dates and office events on it.
We wish you the happiest of holidays for you and your family and value your business and the relationship we have with you. If, for any reason, you have decided to not use our services this year, please let us know so we do not contact you with reminders.
Bruce N. Dietrich, CPA, CGMA
President, Toyer, Dietrich & Associates CPAs