Taxes are done, now what?

For most, 2017 taxes are now complete. Did you end up owing the IRS or did you receive a large refund?  Now is a great time to learn from your 2017 taxes and make some changes for the current tax year, if necessary.

Reviewing your withholdings is especially important with the new tax rules that are effective for 2018. If you are a W-2 employee, you may have noticed a bump in your paycheck earlier this year. This was due to lower federal tax withholdings on your paycheck as a result of the Tax Cuts and Jobs Act (TCJA). The effects of lower withholdings, along with the many other changes within the TCJA, may result in a surprise next year at tax time if you do not review and update your withholdings during 2018.

The Internal Revenue Service (IRS) has just released a new tax withholding calculator to help with reviewing your withholdings https://apps.irs.gov/app/withholdingcalculator/. W-2 employees, self-employed individuals, and filers paying estimated tax may find this new calculator helpful. We suggest reviewing your withholdings now and again in October to determine if any year-end adjustments are necessary. Once you determine what updates are needed, you can contact your payroll administrator to make the change, submit a new W-4 or make the change online if you have the capability.  Alternatively, work with your CPA or tax preparer to review and update your tax withholdings.

Everyone’s tax situation is different and changes over time. There are many other tax changes from the TCJA that may impact your financial situation in 2018; therefore, this article merely serves as a guideline to help you adjust your withholding. Please note that if you have a large taxable event, you will likely need to pay the estimated taxes within the same quarter. A good rule of thumb to remember- the IRS usually likes to get paid when you get paid. You should work with a tax professional or CPA if your situation is more complex.