High income taxpayers alert by the IRS for complex tax returns. The IRS is urging taxpayers to check their withholding soon to avoid an unexpected tax bill or penalty when they file their 2018 federal income tax return in 2019. The high income taxpayers alert was issued so that high income taxpayers can use the IRS withholding calculator to determine whether they will have a tax debt or not.
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 tax brackets. The high income taxpayers alert can take all of these into consideration.
Any of these far reaching changes could have a big impact on the tax refund or balance due on the tax return taxpayers file next year. That’s why the IRS encourages every employee to do a “paycheck checkup” soon to check that they are having the right amount taken out of their pay. The IRS Withholding Calculator and Publication 505, Tax Withholding and estimated Tax, can help. A checkup is especially important for those with high incomes and complex returns because they are often affected by more of these changes than people with simpler returns. This is also true if they also make quarterly estimated tax payments to cover other sources of income or are subject to the self employment tax or alternative minimum tax.
Some of the changes that affect high income taxpayers are a $10,000 cap on deductions for state and local property, sales and income taxes. New limits on deductions for some mortgage interest and home equity debt. Higher limits on the percent of income a taxpayer can deduct as charitable contributions. No deductions for miscellaneous expenses used in prior years, that in prior years had to exceed 2 percent of a filer’s income to qualify. The high income taxpayers alert is a good idea and should be used to kick start tax planning and tax resolution.