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This past year was the beginning of a new tax era with the passage of the law known as the Tax Cuts and Jobs Act (TCJA). The new tax law dramatically changed the way individuals and businesses are taxed going forward, most notably with the reduction in tax rates and the elimination of several itemized deductions. The 2019 tax filing season will be the first chance that taxpayers get to see how the new tax law impacts the way they are taxed on their income.
As tax season quickly approaches, there are a few tips that can help to avoid costly mistakes and make tax filing season more manageable. Some of these techniques have been around for a while, and a few will work very well under the new tax reform.
1. Refer to last year’s tax return when preparing for tax season.
It’s a great idea to have a copy of your prior year tax return nearby when preparing for tax season to check for missed items. A quick side-by-side comparison of the returns can point out errors or missed items before you file.
2. Be aware of the new changes.
One of the most important things you can do this tax season is to take a fresh look at your taxes. There are new tax breaks available this year. One example is the change to the child tax credit, which will now allow this credit to be taken by many more families.
3. Review your withholding.
It’s great if you end up with a larger than normal refund when you file your 2018 tax return, but it is a good idea to review your withholding and make adjustments that let you enjoy more of your earnings sooner.
4. Check your deductions.
The doubling of the standard deduction in 2018 will reduce the number of taxpayers itemizing on their tax returns. If you are close to the threshold of $12,000 for single filers, and $24,000 for married filers, then it makes sense to account for these items. But if you’re not close to these amounts, then you can most likely disregard these for this year.
5. Contribute to tax-favored retirement accounts if eligible.
Retirement account contributions can be a great way to reduce your income tax liability. It’s a great time to review your savings strategy to reduce taxes for those eligible.
There’s still plenty of time to get help with your Federal Income tax return – returns are due April 15th.