Tax season confusion: What you need to know before you file this year
With the ink barely dry on a new tax law, uncertainty abounds on what moves to make or even what to ask a tax preparer. So what do you need to know before you collect that box of receipts and make the trip to see your accountant?
Here's a rundown of the important things to note this tax season, including what the new tax law will (and will not) mean for you:
Change has not come quite yet.
Many people may assume that with the December passage of the tax reform bill, the changes are taking effect with the forms they're filling out over the next few months, said
"People need to move very cautiously as they prepare their 2017 tax returns and not be swayed by all the messaging," Marzahl said.
Marzahl recommends that filers think about their 2017 returns and the tax reform changes in two separate steps: First, file your taxes with deductions you took last year, as long as nothing major has changed, like a marriage or a new baby. Once that's done, he said, ask your tax preparer about what you can adjust to be fully prepared for the changes to come.
While there were a few things that taxpayers could do before 2017 ended to maximize deductions, like pay estimated property taxes for 2018 and increase charitable donations, there is one adjustment that some people can still take advantage of: a retroactive lowering of the threshold for medical bill deductions. For 2017, if you paid more than 7.5 percent of your income in medical bills, you can deduct those from your taxes. That's down from a previous threshold of 10 percent.
For most individuals, the most important thing will be to ensure your withholding is correct.
"For your general W-2 wage earner, your world hasn't changed a whole lot," said
For small-business owners, preparation for the changes will be more complicated, and will depend on some information that has yet to be clearly defined. For example, the
"Unfortunately, there are a lot of question marks as far as what qualifies and how to qualify for it," Goldberg said. "There are a lot of folks who are going to try to shoehorn themselves into that category."
You'll (probably) get a bigger paycheck.
Here's a bright spot coming soon: Most Americans -- about 90 percent -- will see a little bump in their paychecks starting next month, according to the
The salary increases will be the result of adjustments in the
"Everybody has to be mindful -- it's a change, and somebody's going to be caught unaware," Pravia said. "If you get less withheld for the next 11 months, you may have an unpleasant surprise in 2019. That's the No. 1 thing that's going to impact a big portion of the population."
Refunds will be slower.
Expect a refund this year? You'll need an extra dose of patience. All the changes in tax law -- combined with a short-staffed
The delay won't rise past a minor annoyance for most Americans, but it could be a significant burden for low-wage earners who count on federal refunds to cover rent and other critical bills, Marzahl said.
Electronic filers should not be affected by the delay.
Watch out for 'speedy' refunds and other scams.
Because of the slowdown in refund distributions this year, the
But Marzahl calls those loans "fairly predatory and high cost," and recommends taxpayers avoid them. Also, if an outside company claims it can get your refund faster, it's likely a scam, he said.
And don't trust anyone who calls claiming to be with the
Some mandates and credits are unchanged for now.
The tax reform law also repealed the Affordable Care Act mandate that required all Americans to have health insurance or pay a penalty. But it didn't go away immediately. If you didn't have health insurance last year, and you don't claim a waiver or exemption, you'll still need to pay a penalty. The individual mandate doesn't get phased out until
It's a similar situation for the child tax credit. New rules about requiring
Changes may be temporary.
Many of the benefits for individual taxpayers under the new law have an expiration date. Unless
"Everybody's scrambling to understand, and then in eight years we'll try to remember what we did before," Pravia said.
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