Another election tax bill looks like its on the way. House Republicans are gearing up for a vote on a second round of tax cuts, to make permanent some of the tax cuts they previously passed. They are calling this tax reform 2.0
Taxpayers who owed additional tax when they filed their 2017 federal tax return earlier this year can avoid another unexpected tax bill next year by doing a “paycheck checkup” as soon as possible” according to the Internal Revenue Service. The Tax Cuts and Jobs Act, the tax reform legislation passed in December, made major changes to the tax law, including increasing the standard deduction, removing personal exemptions, increasing the Child Tax Credit, limiting or discontinuing certain deductions and changing tax rates and brackets. Another election tax bill could change an awful lot of the current makeup of the tax code.
The IRS encourages taxpayers to be proactive, especially in using the “Withholding Calculator”. The Withholding Calculator can help taxpayers apply the new law to their specific financial situation and make an informed decision whether to change their withholding this year. Adjust their withholding as soon as possible for an even, consistent amount of withholding throughout the rest of the year. Taxpayers with more complex situations may need to use Publication 505. The publication is more effective for employees who owe self employment tax, the alternative minimum tax or tax on unearned income from dependents.
Publication 505 can also be used to help those who receive non-wage income such as dividends, capital gains, rents and royalties. Publications 505 includes worksheets and examples to guide taxpayers through their particular situations. Of course, another election year tax bill could make the withholding calculator and Publication 505 obsolete, as the IRS would have to make a new Publication 505 and a new “Withholding Calculator”, to reflect the changes in the new tax law. We will have to wait and see if the new law passes, then look for those changes if it does. If you do use the “Withholding Calculator” and determine you owe taxes, you can always call us for Tax Resolution.