about how the new tax law will affect you? Youíre not
the ink barely dry on a new tax law, uncertainty abounds
on what moves to make or even what to ask a tax preparer.
So what do you need to know before you collect that box
of receipts and make the trip to see your accountant?
a rundown of the important things to note this tax
season, including what the new tax law will (and will
not) mean for you:
HAS NOT COME QUITE YET.
people may assume that with the December passage of the
tax reform bill, the changes are taking effect with the
forms theyíre filing out over the next few months,
said David Marzahl, president of the Center for Economic
Progress, a Chicago nonprofit which provides free tax
services for low-income individuals and families. But
the 500-page law mostly affects taxes starting in 2018,
not whatís owed for 2017.
need to move very cautiously as they prepare their 2017
tax returns and not be swayed by all the
messaging," Marzahl said.
recommends that filers think about their 2017 returns
and the tax reform changes in two separate steps: First,
file your taxes with deductions you took last year, as
long as nothing major has changed, like a marriage or a
new baby. Once thatís done, he said, ask your tax
preparer about what you can adjust to be fully prepared
for the changes to come.
there were a few things that taxpayers could do before
2017 ended to maximize deductions, like pay estimated
property taxes for 2018 and increase charitable
donations, there is one adjustment that some people can
still take advantage of: a retroactive lowering of the
threshold for medical bill deductions. For 2017, if you
paid more than 7.5 percent of your income in medical
bills, you can deduct those from your taxes. Thatís
down from a previous threshold of 10 percent.
most individuals, the most important thing will be to
ensure your withholding is correct.
your general W-2 wage earner, your world hasnít
changed a whole lot," said Mitchell Goldberg, a
partner and tax attorney at the Florida-based law firm
small-business owners, preparation for the changes will
be more complicated, and will depend on some information
that has yet to be clearly defined. For example, the
Treasury Department has said that some service
companies, like law offices and accounting firms, wonít
be able to take advantage of sizable tax-rate reductions
for so-called pass-through businesses like limited
liability companies, where individual owners pay taxes
for the business on their personal tax returns. But the
definition of a service business hasnít been clearly
spelled out ó something thatís expected to come
later this year.
there are a lot of question marks as far as what
qualifies and how to qualify for it," Goldberg
said. "There are a lot of folks who are going to
try to shoehorn themselves into that category."
(PROBABLY) GET A BIGGER PAYCHECK.
a bright spot coming soon: Most Americans ó about 90
percent ó will see a little bump in their paychecks
starting next month, according to the U.S. Treasury. And
more money is always good, right? Maybe not for long.
salary increases will be the result of adjustments in
the IRS withholding table, which is what employers use
to determine how much to take out of employeesí
paychecks. Many employers will adjust their employeesí
withholding automatically under the new law, experts
say. But Manuel Pravia, a principal at the Florida
accounting firm MBAF, recommends that taxpayers ensure
their withholding is correct so they donít get a shock
come tax time next year. If you are put into a
withholding category that leaves you with extra money in
your paycheck, it could mean that youíll wind up owing
the IRS. The withholding table for 2018 is not yet
available, but will be posted on irs.gov.
has to be mindful ó itís a change, and somebodyís
going to be caught unaware," Pravia said. "If
you get less withheld for the next 11 months, you may
have an unpleasant surprise in 2019. Thatís the No. 1
thing thatís going to impact a big portion of the
WILL BE SLOWER.
a refund this year? Youíll need an extra dose of
patience. All the changes in tax law ó combined with a
short-staffed Internal Revenue Service ó have the
government running a bit slower this year, Marzahl said.
That may delay many federal refunds filed via standard
mail this year.
delay wonít rise past a minor annoyance for most
Americans, but it could be a significant burden for
low-wage earners who count on federal refunds to cover
rent and other critical bills, Marzahl said.
filers should not be affected by the delay.
OUT FOR ĎSPEEDYí REFUNDS AND OTHER SCAMS.
of the slowdown in refund distributions this year, the
Center for Economic Progress expects there may be more
demand for short-term refund anticipation loans.
Marzahl calls those loans "fairly predatory and
high cost," and recommends taxpayers avoid them.
Also, if an outside company claims it can get your
refund faster, itís likely a scam, he said.
donít trust anyone who calls claiming to be with the
IRS; the federal government doesnít reach out to
taxpayers by phone. The only way the IRS will reach out
is through traditional mail, Marzahl said, so donít
fall for someone claiming to be legitimate who uses
phone or email to reach you.
MANDATES AND CREDITS ARE UNCHANGED FOR NOW.
tax reform law also repealed the Affordable Care Act
mandate that required all Americans to have health
insurance or pay a penalty. But it didnít go away
immediately. If you didnít have health insurance last
year, and you donít claim a waiver or exemption, youíll
still need to pay a penalty. The individual mandate
doesnít get phased out until Dec. 31 2018, so the same
rules will be in place when you file next year too.
a similar situation for the child tax credit. New rules
about requiring Social Security numbers do not take
effect on 2017 returns.
MAY BE TEMPORARY.
of the benefits for individual taxpayers under the new
law have an expiration date. Unless Congress acts to
extend them, some of the tax cuts for individuals will
expire in 2026.
scrambling to understand, and then in eight years weíll
try to remember what we did before," Pravia said.