While a lot of people may be smiling when they file their federal income tax returns this year, there will be some frowns, too.
Beginning in 2018 tax rates have been lowered for many people thanks to the Tax Cuts and Jobs Act of 2017. A person or couple earning roughly the same amount in 2018 as in 2017 could very well owe less money or receive a larger refund check this spring. However, since a number of exemptions and deductions were limited or eliminated beginning 2018, not everyone will be better off.
Steps to Get Your Tax Preparation in Gear
For those who haven’t kept good records this year or met with their tax adviser and don’t know how much they may owe for 2018, there is time to get organized. To make certain you have enough cash available to pay the IRS when April 15 rolls around, I recommend taking these steps now:
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Collect all W-2 and 1099 Tax Forms, Determine 2018 Business Income and Expenses as Well as Capital Gains.
Provide this information, as well as a copy of your 2017 tax returns, to your accountant and ask them to compile a quick estimate of how much you may owe.
Beef up your Savings Account.
To relieve any anxiety over having enough money to pay your taxes, plan to have more money than you may need. That means depositing any extra cash into a savings account for a few weeks.
For example, if you expect a bonus from your employer soon, deposit those funds into an interest-bearing savings account so it’s there if needed to pay taxes. Once you have a hold on what your tax bill will be, any extra cash can then be invested for future goals, like retirement or college education, or paying down debt. If you’re expecting a refund, start putting that cash to good use rather than letting it sit idle in the bank.
Consider Selling Stock Now to Pay Capital Gains Taxes.
If you don’t have extra cash coming your way in the next several weeks, and your savings account balance is low, consider selling additional stock now to cover 2018 capital gains tax. Given the stock market’s gains in January of 2019 — the Standard & Poor’s 500 index increased nearly 8% that month — it may be a good time to sell some stock and use those profits for tax payments. Typically, I don’t like dipping into investments to pay taxes, but it’s better than missing the tax deadline and incurring penalties, or taking out a loan.
-
Donating Complex Assets Doesn't Have to Be ComplicatedIf you're looking to donate less-conventional assets but don't know where to start, this charity executive has answers, such as considering a donor-advised fund (DAF) for its tax benefits and ease of use.
-
Travel trends you can expect this summerThe Kiplinger Letter Domestic trips will trump foreign travel amid economic uncertainties, though some costs are down.
-
Donating Complex Assets Doesn't Have to Be Complicated
If you're looking to donate less-conventional assets but don't know where to start, this charity executive has answers, such as considering a donor-advised fund (DAF) for its tax benefits and ease of use.
-
Think a Repeal of the Estate Tax Wouldn't Affect You? WrongThe wording of any law that repeals or otherwise changes the federal estate tax could have an impact on all of us. Here's what you need to know, courtesy of an estate planning and tax attorney.
-
I'm an Insurance Pro: How Not to Get Dumped by Your Insurance AgentYour insurance agent or broker might show you the door if you do any of these five things. Being a good customer is about more than paying your bill on time.
-
The Four D's That Could Force You to Sell Your BusinessBusiness owners (or their heirs) can be rushed into a sale of their company if they haven't planned for a major change in circumstances — or the four D's.
-
The Three Retirement Tax Issues I Nag My Clients AboutA financial professional highlights areas of tax planning that retirees should have on their radar as they finalize their retirement plan.
-
Do You Need Disability Insurance? Three Things to KnowDisability insurance can help replace some of your income during unexpected life events. Here are the basics, courtesy of a financial professional.
-
How to Turn Education Planning Into Retirement PlanningNervous about investing in a 529 plan? If college doesn't pan out, the money can now be rolled over into a Roth IRA, which will grow tax-free until retirement.
-
We Took Them in After the Fire, and Now They Won't LeaveA well-meaning older couple responded to a young couple's plea for help. Now they're looking at having to evict tenants rather than simply asking houseguests to go. How could this happen?
