Those with high incomes or complex returns beware! Check your withholding soon.
Posted on September 11, 2018
The CPAs at Teipen Selanders Poynter & Ayres are getting the word out to their clients that estimated tax payments are due Monday, September 17th this quarter, since the 15th falls on a Saturday. As always, if you need help getting your estimated tax payments together, or worry that you may not be withholding enough, please don’t hesitate to schedule a review with us.
Why all this talk about withholding reviews?
- The Tax Cuts and Jobs Act, the tax reform legislation passed in December, made major changes to the tax code that affect many taxpayers — but especially those with more complicated tax returns.
- This is especially true for those who make quarterly estimated tax payments to cover other sources of income or are subject to the self-employment tax or alternative minimum tax.
- A checkup is equally important for those with high incomes and complex returns because they are often affected by more of these changes than people with simpler returns.
Changes that affect high-income taxpayers:
For 2018, the standard deduction nearly doubled to $24,000 for joint filers and $12,000 for singles. The good news is that many taxpayers who itemized in the past may find they’ll pay less tax in 2018 by taking the standard deduction.
Our CPAs note that there were also numerous changes to itemized deductions for 2018, such as:
- $10,000 cap on deductions for state and local property, real and personal property, and sales and income tax.
- New limits on deductions for some mortgage interest and home equity debt.
- Higher limits on charitable contributions as a percent of adjusted gross income (AGI) a taxpayer can deduct.
- No deduction for those miscellaneous expenses that, in prior tax years, had to exceed 2 percent of a filer’s AGI to qualify (including investment expenses and un-reimbursed employee out of pocket costs such as travel, meals, entertainment and uniforms).
If you want to check into this yourself, you can use the online IRS Withholding Calculator together with Publication 505, Tax Withholding and Estimated Tax, to help see where you stand. Though primarily designed for employees who receive wages, the Withholding Calculator can also be helpful to taxpayers receiving pension and annuity income, too.
It can be fairly complicated to know where you stand. That’s why the CPAs at TSPA strongly urge high-income taxpayers, those with complex tax returns, and those whose personal circumstances have changed during 2018 to take the time now to schedule a “paycheck checkup” of their withholding to avoid an unexpected tax bill or penalty when they file their 2018 federal income tax return next year.