Review your tax withholdings to adjust for possible Tax Act changes.
It's time to start working on those 2018 income tax returns and see what effect the Tax Cuts and Jobs Act — signed into law by President Trump in December 2017 — may have on you.
Will you get a tax return? Will you owe the government money? That's between you and your tax professional. But, now is a good time to think about making changes to your withholdings that could benefit you in the future.
Withholding taxes are the biggest thing that come out of your paycheck, so it pays to understand them, said Brittany Klaus, STCU's accounting manager. They're a prepayment of the income tax due around April 15. By filling out a W-4 form provided by your employer, you determine how much to withhold from your paycheck for income taxes.
Clear as a thousand pages of tax code? Here are some suggestions that may help:
Don't make changes because the law changes. While the Tax Cuts and Jobs Act may have been the biggest tax overhaul in decades, tax law changes every year. The laws are meant to work with your withholding, Klaus said, so unless your tax status has changed, you may want leave your withholding alone, because it will adjust according to the new rules.
Do make changes because your life changes. Getting married? Getting divorced? Having a baby? These are eligible exemptions you can claim, changing the amount you can withhold from your taxes.
Go see payroll. It's easy to change your W-4, Klaus said. Your employer's payroll person can help you wade through the W-4 and other confusing government forms.
Check your pay stub. "This is a good time to look at your pay stub," Klaus said. Check that any changes to benefits were made. Check how much is going into your 401(k). A change in your employee benefits may reduce your taxable income - and what you owe the IRS.
“The average tax return is less than $3,000,” Brittany Klaus says.
Remember the state. If you live or work in Idaho or another state with an income tax, you'll need to fill out the state W-4, too. But, Klaus said, you don't have to fill it out with the same number of exemptions as your federal form. With careful planning, you could set up your withholding to get a refund from one tax return and break even (or pay nothing) from the other.
Is it better to get a return or to owe money? That's a personal decision, Klaus said. Some people would rather overpay their taxes than stress about owing money in April. Others see a refund as an interest-free loan to the feds. The average tax return is less than $3,000, she said.
Check with your tax professional. Everyone's circumstance is different. Consult your accountant to determine what's right for you.