Many people don’t really think about their taxes until the snow is flying and the first document arrives in the mail. Why would you, right? Year in and year out people often get into a set of habits around getting things together for their preparer. That`s usually not a bad thing, but in a year like 2018 when so many things have changed we see on the horizon a sea of surprised faces when they find out their usual $1,200 refund is now a $500 balance owed to the IRS. Or their usual $1,000 tax bill is now $1,900. Of course, like any changes there will also be winners receiving happy surprises. But what side will you be on? If you don’t want to go see a tax planner in the middle of a glorious summer, then at least consider taking some easy but effective actions to help buffer the coming reality in case you are on the losing side. A couple of examples: Have your employer increase your withholding for the rest of the year. Everything hurts less in smaller doses. If you are going to owe more for 2018, then it will help lessen the pain. If you were going to win, then its only 4.5 months until the end of the tax year and you’ll get a bigger refund check, just in time to pay off the Christmas credit card bill. Another option if you can afford to think longer term is to max out your retirement plan contributions. It will lower your tax bill and hey, you’ve been thinking you should do that anyway right? If you’re maxing that contribution already, then many people can still also do a private IRA as well. That could be an additional $11,000 to $13,000 of income you won’t pay taxes on if you are married filing jointly.
If you’re a business owner, you might still be picking up the restaurant check a lot or buying concert tickets or golf rounds. That’s all good business but NO LONGER DEDUCTIBLE, so if the deduction is what has always allowed that behavior, then perhaps changing to office “client meet staff” dinner parties and buying gift certificates for your clients to go play golf (gifts are still deductable) will still get the message across but also allow you to deduct the fun. Hey, if you sent it to them as a gift, perhaps they will invite you to join them!
None of these suggestions are necessarily the best way to handle the coming changes. The best way is to pick a day in the next 30 days and grab last year’s tax return and go see a tax planner! You’ll get much better advice and likely will save more in tax than just doing quick stop gap activities.