After decades of little change in U.S. tax codes, this year's tax filing process is set to usher in a host of new reforms. It's raising enough questions to spur the IRS to create a special standalone publication: "Tax Reform: Basics for Individuals and Families."
So, what does all of this really mean to you? If you're concerned about reducing your taxes or simply trying to maximize any refunds or other tax-related savings, planning ahead is likely going to take on even greater importance in coming months.
Instead of waiting until the looming April 15th filing deadline, start getting organized now, suggests John Dahlin, a CPA and director of IFA Taxes. Several important tasks that might seem rather tedious at first should be dealt with right away, he adds -- such as sorting through receipts and bills that might be useful in claiming deductions.
It's also a timely exercise to gather documents that might prove useful in determining tax status and claiming deductions related to major life events such as a child's birth, marriage, divorce or death of a loved one.
Instead of waiting until a new tax year begins, sorting through home and office expenses, for example, might save you time and money in terms of keeping up with new tax rule implications. Educational expenses, medical costs and charitable giving documents are also likely to come in handy this tax season.
Tax reform is also forcing many taxpayers to decide between taking the standard education, which has been nearly doubled, or itemizing. Modifications have also been made to what is now considered as acceptable deductions for losses due to theft. Child tax credits as well as a $10,000 cap on the state and local tax (SALT) deduction are two other areas of change swept into a revised tax regime.
Now is also a good time to adjust contribution amounts to tax-deductible workplace retirement plans and individual retirement accounts. In traditional 401(k) plans, you can start to consider increasing savings levels to be spread out over the year, thereby deferring more income from a more immediate tax hit.
And don't forget about reviewing your tax savings options outside of work. An IFA Tax professional can serve as a valuable resource to help you decide how much to contribute to your private retirement accounts in 2019. In addition, if you've got a traditional individual retirement account (IRA), you can take right up to the April 15th filing deadline to make contributions for the 2018 tax year.
Also, those already in retirement or 70.5 years or older with a traditional IRA need to make sure to take their required minimum distributions before penalties kick-in.
It might also be a wise idea to consider sooner rather than later implications to your personal tax situation resulting from the recently announced 2019 limits for 401(k) plan and IRA contributions.
At IFA Taxes, we can help you review how higher cap levels can be used to raise your own retirement savings plans in coming years, as well as any possible tax planning implications for the current filing season.