1. Check Your Withholdings
The tax reform laws that were implemented for 2018 caused the automatic withholdings on most people’s paychecks to drop. While this likely meant larger paychecks for you throughout the year, it will also impact your taxes. If you’re used to receiving or owing roughly the same amount every year, this will most likely change due to your decreased withholdings; you’ll be refunded less than normal, or you may owe more than you usually do. In some cases, those who typically received a refund may end up owing.
Now is a good time to review your withholdings and compare them to last year, so you aren’t surprised by the change in your tax situation this year. The IRS also has a tool to help you calculate if you’re withholding the proper amount from your paychecks. Use their Paycheck Checkup calculator to find out how much you should withhold from each paycheck; if you need to make adjustments, file a new Form W-4 with your employer.
2. Get an Estimate of Your Tax Liability or Refund
Even if you’re not ready to file just yet, the IRS recommends calculating what your tax liability or refund will be now, so that you can properly prepare for it when you file. The tax reform will likely impact refunds and tax bills significantly, so even a rough estimate can help you to get funds in order to handle a larger tax liability, if necessary.
You should also be aware that anyone claiming the Earned Income Credit or the Additional Child Tax Credit will have their refunds delayed at least until the middle of February. And, with the government shutdown delaying the IRS’s tax season, those delays could last much longer.
3. Renew Your ITIN If Needed
Certain nonresident aliens, resident aliens, and dependents or spouses are assigned an individual taxpayer identification number (ITIN) in place of a Social Security number. Your ITIN plays the same role as an SSN on your tax return; however, unlike an SSN, an ITIN expires. So, if you have an ITIN that might expire before you’re able to file your return, you should submit a renewal application now to avoid any potential complications with the IRS.
4. Look into New Tax Forms
The tax reform laws have also updated some fairly common tax forms. For example, Form 1040 has been updated and shortened to more closely resemble Forms 1040-EZ and 1040A. However, it also now requires additional schedules to attach in certain circumstances. Take a little time to check out the shortened Form 1040 and familiarize yourself with it. This will help you to get a head start and make it less confusing once you’re ready to file.
5. Know Your Resources for Help
Even the IRS is aware that this tax year is going to be more complicated than usual, and there’s bound to be a lot more confusion. However, there are many resources that you can turn to for assistance, including online resources through the IRS website, and the Volunteer Income Tax Assistance program. Do some research and find where you can turn for help when you have questions.
Our team of experienced CPAs is always available to offer you tax help in Provo and answer any questions you might have regarding the reformed tax law, or to assist you with filing your taxes. Contact us today to set up an appointment.