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.
-
The 401(k) Shake-Up: Private Equity's Role and RisksA new investment frontier is coming to your 401(k). We asked financial experts to break down what private equity means for your retirement.
-
Is Crypto Investing Coming to a Credit Union Near You?Credit unions are getting in on crypto investing through partnerships with third-party platforms, but the risks to investors still apply.
-
1031 Exchanges Aren't Just for Big Real Estate Deals: An Expert's Playbook for Regular Property OwnersOne of the biggest mistakes property owners make is not realizing they're eligible for tax deferral through a Section 1031 like-kind exchange.
-
Timing Your Retirement: A Financial Professional's Guide on When to Say WhenFirst, ask yourself what kind of retirement you want: big and splashy or simple and sweet. Then you can run the numbers to help choose just the right moment.
-
Three Common Social Security Myths in 2025: A Retirement Strategist Explains What You Need to KnowTaxes on benefits haven't been eliminated, and based on current projections, the program isn't going bankrupt. Understanding the truth about Social Security and knowing what you can control can help you better prepare for retirement.
-
Thanks to the OBBB, Now Could Be the Best Tax-Planning Window We've Had: 12 Things You Should KnowThe new tax legislation offers unique opportunities to make smart financial moves and save on taxes, especially for people nearing or in retirement with significant savings.
-
Asset-Rich But Cash-Poor? A Wealth Adviser's Guide to Helping Solve the Liquidity Crunch for Affluent FamiliesMany high-net-worth families experience financial stress because of a lack of immediate access to their assets. Liquidity planning aims to bridge the gap between long-term goals and short-term needs and avoid financial pitfalls.
-
Which of These Four Withdrawal Strategies Is Right for You?Your retirement savings may need to last 30 years or more, so don't pick a withdrawal strategy without considering all the options. Here are four to explore.
-
DST Exit Strategies: An Expert Guide to What Happens When the Trust SellsUnderstanding the endgame: How Delaware statutory trust dispositions work, what investors can expect and why the exit is probably more important than the entrance.
-
What the OBBB Means for Social Security Taxes and Your Retirement: A Wealth Adviser's GuideFor Americans in lower- and middle-income tax brackets, the enhanced deduction for older people reduces taxable income, shielding most of their Social Security benefits from being taxed.
