If history is any indication, more than 33 million American taxpayers STILL have not filed their tax returns as of this writing, and many of those will push it to the absolute limit of April 17. If …
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If history is any indication, more than 33 million American taxpayers STILL have not filed their tax returns as of this writing, and many of those will push it to the absolute limit of April 17.
If you are one of them, good luck.
But we turn our attentions here to the people who like to plan ahead and get a jump on things — including NEXT year’s tax returns.
I wrote in an earlier column about the retroactive effects from new tax laws adopted in December, and now is the time to get a better understanding of changes that affect next year’s tax returns.
The recent “Tax Cuts and Jobs Act” has impacted every client we have seen and only the rarest of taxpayers can afford to ignore the new law’s modification to tax rates, repeals of personal and dependent exemptions, and increase in personal standard deductions.
Most of these changes will have a positive impact on taxpayers’ liabilities but the federal tax withholding tables have also been modified. Many taxpayers will sadly discover next year that the withholding reductions EXCEEDED the modifications that the new laws made in their particular case.
Politicians who supported and voted for the new tax laws have commented that you will see more money in your paychecks. However, not every taxpayer is affected the same way.
For example, if you are an employee involved in outside sales — where you entertain clients, drive your car to meetings and different locales, pay for hotel rooms - all expense-deductions are eliminated as part of the new law. Other expense-deductions repealed as of the beginning of this year include; professional and union dues, education expenses and legal costs to protect employment.
Ready for more bad news? For self-employed individuals - from a sole proprietorship to a “C” corporation - all deductions for entertainment expenses have been repealed.
“Entertainment” expenses include meals with clients or referral sources while in your tax home (not traveling), tickets for sporting and entertainment venues, and those great golf and ski outings.
Sorry about that.
As for individual taxpayers, the increased standard deduction is a two-edged sword. We live in a state that has relatively low tax rates - a flat 4.63 percent - and residential property taxes that hover at less than one percent of fair market value. Still, the new tax law restricts the deduction for ALL taxpayers for state and local taxes at $10,000. Residents in states with higher property taxes are more negatively affected.
Check your paycheck
How can you be proactive? The IRS has launched a “Paycheck Checkup” campaign. Visit the IRS website at www.irs.gov, and look for the new Withholding Calculator - a new online tool to assist you in computing the appropriate amount of withholding allowances.
Help yourself eliminate (or at least reduce) the nasty surprises you might otherwise get when you sit down to fill out next year’s income tax return.
Fran Coet is founder and owner of Coet2 CPAs in Westminster, www.Coet2.com. Call 303-426-6444.
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