The Tax Cuts and Jobs Act changed the way tax is calculated. The IRS encourages everyone to perform a “paycheck checkup” to see if you have the right amount of tax withheld for your personal situation.
Among the groups who should check their withholding are:
The new tax law could affect how much tax someone should have their employer withhold from their paycheck. To help with this, the IRS urged taxpayers to visit the Withholding Calculator on IRS.gov. The Withholding Calculator can help prevent employees from having too little or too much tax withheld from their paycheck. Having too little tax withheld can mean an unexpected tax bill or potentially a penalty at tax time in 2019. And with the average refund topping $2,800, some taxpayers might prefer to have less tax withheld up front and receive more in their paychecks.
If you find you need to change your withholding, you should complete a new Form W-4, Employee's Withholding Allowance Certificate. Submit the completed Form to your employer as soon as possible. Withholding takes place throughout the year, so it’s better to take this step as soon as possible.
If you have additional questions about your withholding, give us a call.
It is burned into our memories that April 15 is the tax deadline. April 15. April 15. APRIL 15!!!
As with most holidays, if the special day falls on a weekend it is observed another day. For tax deadlines the due date becomes the next working day after the scheduled date. You might think that since April 15, 2018 is a Sunday, the next working day would be Monday, April 16. If you were making this presumption for most of the country you'd be correct. Enter the District of Columbia.
In 1862 a man by the name of Abraham Lincoln ended slavery by signing the Compensated Emancipation Act on April 16. This became a legal holiday in Washington, D.C., and Emancipation Day is now observed on April 16 every year. Federal law states that holidays in Washington, D.C. are considered legal holidays for tax deadlines. Because April 16 is on Monday this year, the tax deadline is pushed again to the next working day, April 17. (Last year Emancipation Day was Sunday, so the holiday was observed on Monday, and individual tax returns were due Tuesday, April 18.)
So for 2017 you have until April 17 to file your tax return, or you can file an application for an extension. Remember, however, that an extension of time to file is NOT an extension of time to pay. Penalties and interest will be added to your balance due if you owe and have not paid on time.
Among many other changes, the recently passed Tax Cuts and Jobs Act increased the standard deduction, removed personal exemptions, increased the child tax credit, limited or discontinued certain deductions, and changed the tax rates and brackets. To help account for these new changes to the individual income tax the Internal Revenue Service has issued a new 2018 Form W-4, Employee’s Withholding Allowance Certificate.
The IRS explained that certain taxpayers would be more likely to have a change in their tax situation necessitating filing a new Form W-4 with their employers, including two-income families, taxpayers with two or more jobs or who work only part of the year, taxpayers with children who will claim credits such as the child tax credit, and taxpayers who itemized deductions in 2017.
Incorrect deductions for withholding can lead to taxes due or excessive refunds when individual income tax returns are filed. Employees wanting to update their deductions and employers hiring new employees should use this new 2018 form to get the most accurate withholding.
Unfortunately it isn't always easy to know when a scammer is calling you. Millions of dollars and personal information have been lost due to tax scams.
The IRS uses the US Postal Service to initiate all contact with a taxpayer. They will never make their first contact by a phone call, email, text messages, or social media channels to request personal or financial information. However, after multiple letters they may attempt to call you.
While we may not appreciate the work they do, IRS agents are generally professional. Note that an IRS agent will never:
Don't fall victim to high-pressure calls demanding immediate payment. If you are ever unsure about a purported liability, contact us or call the IRS directly.
Getting a tax benefit out of your home just became a little more difficult.
Homeowners have long used the equity in their homes as collateral to secure loans. Whether a home equity loan (typically fixed amount, term, and payment) or a home equity line of credit (a revolving credit line), individuals borrowed to get cash. When the funds were used as acquisition debt (to buy, build, or significantly improve the home), the interest was deductible as home mortgage interest for taxpayers itemizing on Schedule A.
The newest tax reform has eliminated that interest deduction. This doesn't mean that new mortgages are not eligible. Even interest on existing equity loans will no longer be deductible.
An alternative to an equity loan is to refinance your first mortgage. By doing a cash-out refinance, you can accomplish the same objective as taking an equity loan. The downside, however, is that first mortgages can require more documentation and incur greater fees. Also, you might lengthen the payoff period for your home, taking your existing mortgage and possibly stretching it out to a new 30 year term. Shorter terms are often available, so be conscientious when selecting your repayment terms.
In a recent discussion with a senior manager at a financial institution he commented that he foresaw a significant number of potential borrowers opting for cash-out refinances in lieu of equity loans. If interest deductibility is a motivating factor then I certainly agree. However, if simplicity and reduced fees are more important than deductibility, equity loans may continue to prove more desirable.
Next Step Blog
Our blog is intended as a tool to keep people informed about relevant tax and accounting issues. If you have a question or an idea for a post, let us know!