Yes, I know we're well into day four of this brand spanking New Year. But we all get a pass on the first day to recover from our New Year Eve parties.
And days two and three were consumed by looking back at what was accomplished tax-wise in 2017, looking ahead at what we can expect from taxes in 2018, chatting with fellow tax folk (OK, maybe that was just me) and dealing with scary winter weather. Bundle up, all my friends along the East Coast!
Now, though, it's time to get down to tax business.
Time for 2017, not 2018, taxes: I'm talking, of course, about 2017 taxes.
Yes, I and all you loyal readers know that on Jan. 1 new tax laws went on the books. And we do need to get up to speed on the changes.
For the most part, however, those tax changes apply to our 2018 taxes that just started accruing.
Right now, with the arrival of the tax season that also started this month, we need to focus on our 2017 taxes.
To help with the filing of our 2017 return, here are four quick January Tax Moves you can make.
1. Hire a tax pro: OK. I know I said we don't need to worry so much about 2018 tax law changes right now. But eventually this year we will need to look at how they affect us.
For some folks, the changes will be cut-and-dried. The only thing that will matter is the different tax rates and income brackets and the increased size of their standard deductions.
Others of us, however, will have to decide whether we want or need to shift from itemizing in 2018 to the enhanced standard deduction method. Folks with kids and other dependents will need to learn how the revamped child and family tax credits work. And millions of small business owners must evaluate if their current type of pass-through operation is the most effective under the new laws.
Sure, you can spend your time on the internet reading the ol' blog (thank you!) and other tax publications. But in most cases, those of us who write about taxes do so in generalities to reach the widest possible audience. Basically, we're trying to give you an idea of tax situations that you can adapt to your personal situations.
Tax professionals, however, will help you sort through how the new laws specifically affect your unique personal tax circumstances. They'll also know what few new laws do have an impact on our 2017 returns, like the retroactive cut in the itemized medical deduction threshold from 10 percent to the old 7.5 percent of adjusted gross income level.
And as your tax pro helps you file your final tax return under the old 2017 tax year laws, he or she can and explain what will change for you in 2018.
It's better to start early in hiring tax help. Tax preparers will be extra busy this year. By the time you decide you do need professional help, your preparer of choice might be fully booked.
So find your tax professional, for 2017 tax task and future filing and tax planning help, ASAP.
2. Get organized: Regardless of whether you work with a tax professional or do your taxes on your own, generally using tax software, you'll need all your tax material. This includes tax a variety of tax documents — W-2s, 1099s, year-end account statements — that will soon be on their way to your email or snail mail box.
Also gather any other tax material you already have, such as charity receipts, mileage records for business use of your car last year, medical expenses you paid out-of-pocket and estimated tax payment records.
Set up a system now to collect all this data.
If you go electronic, put digital copies into a special folder on your computer. That way they'll be easily accessibly if you do your taxes on your own. And if you use a tax pro, you and easily can email him or her your tax info or copy it onto a thumb drive to take when you when you meet face-to-face.
If you're old school and still rely on paper (no judging!), your collection system can be as simple as an accordion folder, with documents dropped into the appropriate slots. Or you can use separate folders and/or envelopes to hold the material in a filing cabinet drawer.
The key is just to get all the tax-related items you'll need into one place so that when you go to fill out your 1040, you have all the information you or your tax pro need.
3. Pay your estimated taxes: One of the most fun tax things about January is that while the month kicks off the start of a new tax year, it also wraps up the previous one for folks who pay estimated taxes.
The table below shows the official due dates of these four extra payments.
|Payment||Due Date*||For income received in|
|1||April 15||Jan. 1 through March 31|
|2||June 15||April 1 through May 31|
|3||Sept. 15||June 1 through Aug. 31|
|4||Jan. 15 of next year||Sept. 1 through Dec. 31|
You saw that * notation, right? It applies this year.
Monday, Jan. 15 is the federal holiday honoring Dr. Martin Luther King, Jr. So the Internal Revenue Service pushes the final estimated tax deadline in 2018 to Tuesday, Jan. 16.
You can skip this final payment if you're sure you'll get your 2017 tax return filed and pay any due taxes by Jan. 31. Good intentions don't count here. But if you do that and then miss filing your full 2017 Form 1040 by the 31st, Uncle Sam will hit you with penalties for not paying your estimated taxes on time.
So it's probably a good idea to make that final estimated tax payment on Jan. 16.
4. Adjust your withholding: If you're an early filer, that probably means you get a tax refund. You might want to rethink that strategy.
Here are a few reasons why.
First, the average federal tax refund through Sept. 1, 2017, was $2,782. That's a nice chunk of change to get in one lump sum. But if you'd been getting that money through more accurate withholding, you would have had $349 more dollars to spend in each of the first eight months of last year.
You could have paid off a high-interest credit card bill, put money into your child's college fund or started as savings account that would have paid you at least a little interest. Remember, the Bank of IRS does not pay you a red cent for holding your overpaid tax amount all year.
Second, if you claim the Additional Child Tax Credit or Earned Income Tax Credit, the IRS cannot send you your refund until at least Feb. 15. Realistically, due to routine processing, many of those U.S. Treasury refunds won't show up as a direct deposits or paper checks until nearer the end of that month.
Why wait for your money? Get it as you earn it instead of letting the IRS hold it longer than you want.
Finally, the IRS is only going to get tougher on trying to stop tax refund fraud. That means more double checking of returns that will, at best, slow down 1040 processing and refund issuance. And, god forbid, there's a suspicious issue with your return, your refund will be held up even longer.
The IRS says it will use our old withholding information to calculate how much to take out of our checks this year under the new tax laws. But if you know you are again getting a refund, you might want to go ahead and fill out a new W-4 anyway so that you can get possible new tax law added cash in hand.
More tax moves to make: These are just a few things to think about this first month of this spanking New Year. You can find more in the January Tax Moves listed over in the ol' blog's right column of this page.
They're listed just below the countdown clock that's keeping track of how long until this year's filing deadline, which, like the estimated tax final 2017 deadline, is pushed back a bit. This year Tax Day arrives on April 17.
For now, though, we're focused on January. So peruse this month's tax moves at your own pace based on how hard you partied on New Year's Eve, your personal recovery ability and how eager you are to get started on your 2017 taxes.
Happy New Tax Year!