Recent new tax laws have brought a slew of changes that could impact how much you owe for your 2018 taxes. The Government Accountability Office recently issued a report with a warning that many taxpayers may come up short if they don’t act now and adjust their withholdings. No one wants to end up owing more than they thought so here are some tips and suggestions to help.
The new tax laws will limit or even eliminated many itemized deductions claimed by millions of taxpayers. The biggest contributors to this are the new limits on state and local tax deductions (the SALT deductions), a restriction on the amount you can deduct for home mortgage interest and the elimination of the deduction for job-related expenses.
Those most likely to owe tax for 2018 are those who itemize deductions. The IRS recommends that taxpayers who itemize should do some planning now to avoid the sticker shock of a large tax bill for 2018.
If you are concerned, a good tool to use is the Withholding Calculator found on the IRS website. This free tool will ask you to enter estimated values for your income in 2018, the number of children you would claim, an estimate of your itemized deductions and the amount of federal tax withheld on your last paycheck. It only takes a few minutes — all you’ll need is your most recent pay statement. But having your 2017 tax return handy can help to speed up the process.
The calculator will not allow you to enter any amount that exceeds $10,000 as a deduction. If your calculated results indicate you will owe, you can save money now for your tax bill and put it in a money market fund that could help you earn some interest. You can revise your W-4 and increase your amount of tax withheld. Also, consider any additional income that you are not currently paying taxes on such as a side business, interest or dividends. Don’t be caught unprepared.
Information summarized from: “Millions of taxpayers could wind up owing for 2018” By RAY MARTIN MONEYWATCH September 10, 2018, 5:00 AM. https://www.cbsnews.com/news/millions-of-taxpayers-could-wind-up-owing-for-2018/
Tasha S. Barnes, MBA, MHA