Every year at this time, you start to hear more about the importance of year-end income tax planning in radio and television commentary. For many people with more complex businesses or investments, the beginning of the 4th quarter of the year signals the time to start to organize their tax documents and to set-up an appointment with their advisors to review results.
This year is different! This year, tax planning should be important to everyone, not just for those that have complex tax situations. The implementation of the Tax Cuts and Jobs Act of 2017 has impacted every taxpayer. While we have all heard about it, not everyone has an applied working knowledge of what the impact will be in the first annual income tax filing season, which begins in about three months.
This Tax Act is considered the largest overhaul of the tax code for both businesses and individual taxpayers since 1986. At this time last year, the media bombarded us on a daily basis with points of negotiation between the House and the Senate bills. Everyone heard sounds bites as to how much the average individual would save under the new plan. Everyone heard about the changes in both the individual and the business tax rates. The question is what does it mean for your business and for you personally?
For many business owners, they are unsure as to how the new Section 199A passthrough tax deduction will affect them. Should they be considering making capital expenditures in their business before the end of the year, or should they wait until 2019? Do changes in the deductibility of business meals and entertainment costs really have a meaningful impact on their taxable income?
For many who are employees, they may have received an increase in their net payroll mid-year when the Federal tax withholding tables were updated. While this may have improved their cash flow throughout the balance of the year, do they know whether they have paid in enough tax to cover other sources of income such as interest income, dividend income, and capital gain income. Have they met the safe harbor requirement that exists for all taxpayers in determining the minimum amount of tax that must be paid in throughout the year in order to avoid any underpayment penalty if they do, in fact, owe additional income tax on April 15, 2019?
For individual taxpayers, many are unsure whether they should still be keeping receipts
to itemize their tax deductions. Will they still receive a tax benefit for their dependent children? Will the interest paid on their Home Equity Lines of Credit still be deductible? Does everyone still have to secure health insurance to avoid paying an additional penalty when filing their income tax returns?
These are the some of the questions that make tax planning so important for everyone
Need help deciphering the new tax law and figuring out whether you will truly be paying less income tax than in years past? Feel free to give us a call to begin the process. There may be steps that can be taken before the end of the year to minimize your tax liability!