Planning for How Tax Changes Will Affect You

Tax law changes relatively often. Major tax reform is rare, but rules and regulations, especially at the state level, have a tendency to fluctuate, and this can mean that you see slightly different results in your tax returns from year to year. For example, in 2018 a number of IRS filing changes took effect, including a much larger standard deduction and a lower mortgage interest deduction.

Income TaxThe Trump administration passed a number of tax law changes as one of its first major acts. While tax reform doesn’t happen often, when it does occur the changes can be big. For example, as of 2018 the personal exemption no longer applies, which could hurt low-income families. Other changes include a lower mortgage interest deduction cap, and the removal of a number of itemized deductions that many people rely on such as home office and work clothing expenses, licensing fees, and many others.

Luckily, it isn’t too difficult to keep informed and avoid strange or nasty surprises on your tax return, it just requires a little extra know-how. So, prepare to have some know-how dropped on you!

Check In on Your Paycheck Withholding

A potential pitfall people can run into with taxes actually has nothing to do with filing. As legislation changes, different rules come in and out of effect, but the deductions on your regular paycheck may not reflect them.

At the end of the year, a large number of people get a tax return from paying in more taxes through the year than necessary. At the end of the year, the exemptions and deductions you’re entitled to get accounted for all at once and you get a return. Sometimes, especially for people who own businesses or are self-employed, it’s the other way around. They end up getting a bill for the taxes they still owe.

If the tax laws change, but the automatic deductions on your paycheck don’t, then tax season can become unpredictable for you. The amount of money you get back may change, or you may end up owing taxes! That can be a nasty shock for someone who has grown to expect a certain amount back at the end of the season.

The good news is that you can adjust the withholding on your paychecks, so it’s a good idea to make a habit of checking that you’re making the appropriate deductions. A tax professional can help you understand the shifting laws and advise you on how much to adjust your withholding to avoid surprises during tax season.

Check In on the Deductions and Exemptions You’re Entitled To

The types of expenses that you can claim on a return can change, as can the requirements for reporting certain types of income. When legislation changes, it’s important to make sure you understand how your filing is going to be affected. This is also important information that can guide your political voting choices, so investigate it early!

Certain types of things that you might not expect can count as income. For example, if an employer is helping you pay off student loans, those loan payments are taxable as income. There have also been recent changes to how small business income is taxed and how the income of married individuals is taxed, meaning whether tax reforms are benefits or hindrances often depends on your individual situation. For example, many married couples will find themselves in a lower tax bracket, which may mean they want to lower their automatic deductions through the year.

All About E-Filing

E-filing your taxes is an excellent way of reducing the time and expense involved with tax season. This is often more effective the simpler your taxes are.

If all you’re reporting is income from an employer, e-filing is likely one of the best options for you. The more complicated your taxes become, however, the more you may want to speak to an expert as you file. If you’re self-employed, have multiple employers, or especially if you own a business, an accountant or accounting service is likely a good idea.

Just remember that your personal information is vulnerable at several different points when submitting it online. No matter how safe an e-filing system is, the hardware and internet network you use to file could have compromised security. Don’t do your taxes on public networks!

Submitting your tax information electronically might very well be one of the safest options, but nothing is foolproof. Your systems might be vulnerable, and even the government systems might be breached. It’s not a reason to panic, but it is a reason to make absolutely sure you’re using trusted services on secure networks and that your antivirus is up to date.

Got all that? Ready to get on top of those taxes? Post any questions in the comments!
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Avery PhillipsAvery T. Phillips is a freelance human being with too much to say. She loves nature and examining human interactions with the world. Comment or tweet her @a_taylorian with any questions or suggestions.