It’s tax season and thanks to new legislation, your taxes may look a little different this year than they did last year.
The major tax reform, commonly referred to as the Tax Cuts and Jobs Act, was enacted in December 2017. This tax reform affects both businesses and individuals.
Recent changes include: elimination of personal exemptions; reduced tax rates for most people; increased standard deductions ($12,000 for single persons, $18,000 for heads of households, and $24,000 for married couples filing jointly); increased tax credit for children and dependents ($2,000 per qualifying child and a new $500 credit for qualifying dependents); and changes to itemized deductions.
Due to these changes, you should look at your paycheck and see if you’re withholding the right amount of tax. Withholding too little each paycheck can result in an unexpected bill at tax time. And if you’re withholding too much, you can make adjustments to receive more in your paycheck each pay period. If you do this, expect a smaller refund each April.
Use the IRS Withholding Calculator to calculate how much you should be withholding. Please remember that any changes you make to your withholdings at this point will affect your 2019 returns (filed in 2020), and not the taxes you are currently working on filing for 2018.
Once you’re ready to file your taxes, the IRS recommends using tax software and e-file or seeking the help of a tax professional to complete and e-file your tax return.