Small businesses and individuals wisely turn to tax preparation services when faced with questions about overall financial strategy, especially in light of the new tax bill recently passed by Congress.
Experts suggest that a comprehensive tax strategy for 2018 should include several key factors, whether you are filing as a small business, an individual or both. Keep in mind that most tax preparation services can offer sound advice about all the legal changes included in the Tax Cuts and Jobs Act.
Here are some key points to keep in mind as you begin to examine your 2018 tax situation:
Paychecks and Filing Times
Note that your employer might move you into the correct tax bracket, as dictated by the new law, as early as January 2018, so you'll possibly see more or less income on your paycheck. But because the law changes don't legally go into effect until calendar 2018, you won't be needing to worry about filing under those new rules until April of 2019.
Get "The Big Picture" First
Tax experts say you should review the entire tax law and your own situation to get a feel for how you'll be situated come 2018. Don't create a "strategy" until you've seen how the law affects you, if at all. However, most people will see at least some changes based on the new legislation.
SALT is Important
Note that one of the most consequential, and controversial, parts of the new law had to do with deductions for state and local taxes. Under the Tax Cuts and Jobs Act, you will be limited to $10,000 in deductions for any local and state taxes paid.
Standard Deductions Doubled
The other major change is the doubling of the standard deduction and the elimination of the personal exemption. Joint filers will get a $24,000 standard deduction, while individuals will get a $12,000 SD.
Know Your Bracket and Withhold Accordingly
The entire bracket structure has changed. That means you might want to speak with your employer and re-set your withholding levels so as not to have too much kept back from each paycheck. The new brackets, expressed as percentages, are 10, 12, 22,24, 32, 35 and 37.
To Itemize or Not to Itemize
Finally, you'll want to compute your tax bill two ways to find out which method lets you pay a lower overall bill to the IRS. First, prepare your return with itemized deductions, keeping in mind that many were eliminated in the new tax bill. Second, prepare your return with just the standard deduction. Most individuals will see that the second methods yields the lower tax bill, whether they are filing as individuals or small businesses.
Of course, everyone's situation is unique, so there's no such thing as a "generic" tax strategy that covers a large percentage of the taxpaying public. That's why individuals and small businesses are encouraged to seek out the help of a professional tax preparation service. The new tax law is complex and contains all sorts of provisions that are completely new for taxpayers. Get ready for 2018 with help from expert tax preparers.
