Let’s Talk Taxes

TGIF 2 Minutes needed to take a brief hiatus and get re-charged with fresh topics and ideas. So, what better time than a Monday to start looking forward to Friday…and talk taxes, tax filings and tax refunds?!

tax forms

Taxes and Tax Filings

In the recent reading that I have done on the topic of taxes and filing* it is strongly recommended that you get your 2018 tax calculation done – whether by your CPA (highly recommended) or yourself – much sooner than in prior years. The brokerage firm 1099 Reports and Tax Summaries are now available and W-2 documents are in most people’s hands. Actual tax filing can still be mailed on or just prior to April 15th; but because of the changes to the tax code that took effect for 2018 tax refunds may be materially different (or lower) than what you are used to. Note that data from the Tax Policy Center, a nonpartisan think tank located in Washington DC, states that the 2017 tax overhaul which took effect in 2018 lowered individual income taxes for 65% of filers (probably the kids and employees of most people reading this) and raised taxes on 6% of filers (probably most of the people reading this) leaving the rest unchanged (possibly some of the people reading this).**

Tax Refunds

The difference in the amount of tax refund (which upon calculating is likely less than in previous years) lies in the fact that parts of the tax code – which reduced most people’s overall taxes paid – took effect already in employees’ paychecks throughout 2018. This is partly due to lower amounts of withholding – boosting take-home pay – that took effect in early 2018 for employee pay and pensions. Saying any more about this concept would be going too far “into the weeds”… but you can research it on your own or by consulting with your CPA. Again, it is strongly suggested to submit your data to your CPA or do your calculation EARLY, as in the next 2-3 weeks.

A couple of tips:

  • One obvious resource I typically suggest that taxpayers use to understand their taxes paid is their year-end pay stub. The December 31st pay stubs for 2017 and 2018 can be compared, simply to understand how much Federal and State taxes you paid through payroll. You can also see how much in total that you deferred (hopefully you maxed out!) to your 401k plan. Then compare a regular bi-weekly or monthly paycheck from around March 2017 with that of March 2018 to see how your taxes paid changed.
  • It is early enough in 2019 to make meaningful adjustments to withholding and 401k plan contributions (pre-tax and after tax). Adjusting your withholding affects the amount of “refund” that you may or may not receive. ALWAYS CONSULT WITH YOUR TAX ADVISOR ON THESE ITEMS.
  • Also helpful is scanning your 2016 and 2017 tax returns to quantify how much mortgage interest you paid and charitable contributions you made in the past. You may discover the reason why your tax advisor tells you that you will NOT be itemizing your taxes for 2018.

More information to come on this topic later in the week.


** Source: (excluding parenthetical comments) Laura Saunders, WSJ.com, “What You Need to Know About the New Tax Law“.


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