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5 February tax moves

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Hello, February! If we ever were in need of your hearts and flowers, it is now.

January was tough tax-wise.

We had to worry about whether the Internal Revenue Service actually would get filing season open as the longest federal government shutdown in U.S. history dragged on. It opened as promised on Jan. 28, but be patient.

Plus, we're dealing with our first filing season under the many, many changes brought about by the Tax Cuts and Jobs Act (TCJA).

Yep, we definitely need some tax love. And some tax guidance, whether we're earlier filers awaiting refunds or procrastinators taking our first tentative steps to get our tax filing material in order.

I hear you. So as an early Valentine, whichever taxpayer category you fall into, here are five February tax moves that could to make in February.

1. Collect your tax statements.
Most of the tax statements that you need to fill out your Form 1040 should be arriving by early this month. They were supposed to be to you or at least issued by Jan. 31.

The key forms for income reporting purposes are the W-2, which you get when you're an employee, and 1099-MISC forms if you're an independent contractor and earned at least $600 on each job. Other types of taxable income are reported on a variety of 1099 versions.

You should check each statement when it arrives to ensure that it's correct. If you think a tax statement is wrong, contact the issuer to clear up any questions. And remember, even if you don't get a 1099 because you didn't make enough to trigger its issuance, you're still legally required to report those smaller earnings, too.

2. Decide which deduction method to use.
One of the biggest changes of the new tax law is the dramatically increased standard deduction amounts. For 2018 returns, they are:

  • $12,000 for single and married filing separately taxpayers,
  • $18,000 for head of household filers and
  • $24,000 for married couples filing a joint return and qualifying widows/widowers.

The TCJA also reduced or eliminated many items on Schedule A, meaning that if you do still itemize, some claims of filing seasons past might not be available.

Check out your itemizing options and then compare those amounts to your new, bigger standard deduction. The best move generally is to use the method that provides you the larger deduction.

3. Pick a preparer.
All the TCJA changes mean that there's likely to be more demand for tax professionals' services. If you are considering hiring a tax preparer this year, decide soon before their schedules are full.

4. Explore your free tax prep options.
Free File, the IRS' partnership with the tax software industry, is now in its 17th year. If your adjusted gross income (AGI) is $66,000 or less, you can use this no-cost online tax preparation and e-filing option.

Lower income and elderly taxpayers also might be able to get more personal help, again for free, from Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) locations nationwide.

5. Know how you'll pay.
There's a distressing possibility that many folks — some estimates say 30 million workers — who didn't adjust their withholding last year to better align with TCJA changes could face unexpected tax bills. The IRS says it'll offer some leeway as far as penalties in these cases, but you'll still owe the due tax.

I hope that doesn't happen, but just in case, be ready. Check into the many e-pay options. And if you can't cover the full bill, look into an installment plan.

More February tax moves: Those tax considerations shouldn't take up too much of this short month's time. In fact, there are more tax tasks you can take care of during these next 28 days.

February_tax_moves_160You can find them in the ol' blog's right column. They're listed under the February Tax Moves heading (like the one at left), just beneath the countdown clock that's keeping track of how many days until the April 15 (or 17) tax filing deadline.

But don't wait too long. February will be history before you know it.

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