How the New Tax Reform Act will Affect You
The Internal Revenue Service is now open for the 2019 tax filing season. This year will be the beginning of an entirely new process for the agency, which is already processing 2018 federal tax returns. In spite of the government shutdown, the IRS is operating at full capacity.
What is different about this new tax-filing season?
Congress passed the Tax Cuts and Jobs Act in December 2017, the first major tax overhaul since President Reagan signed the Tax Reform Act of 1986. The goal was to simplify the tax filing process for not only individual taxpayers but also for businesses.
New forms, new changes
While the Act implemented a vast array of changes, the ones that will apply to most taxpayers deal with:
- Child credit deductions (doubled)
- Income tax brackets (adjusted to account for inflation)
- Standard deductions (doubled)
The 2018 tax reform act has doubled last year’s $1,000 deduction: it’s now $2,000 per qualifying child under age 17. There’s more good news; they increased the income thresholds. A married couple filing jointly may earn $400,000, and an individual filing as a single taxpayer can earn up to $200,000 and still take the deduction.
It would be simpler if everyone paid the exact same percentage in taxes, but it is doubtful it will happen in our lifetime. The IRS has calculated various ranges to determine tax liability. The Act still has seven tax brackets and seven marginal tax rates; however, it changed the income ranges within each range.
When you prepare your 2018 tax return you will notice that these marginal tax rates have shifted – in your favor! The percentage rate you will pay will be determined after deductions.
The Act also doubles the standard deduction. For example, a single taxpayer’s deduction that was $6,350 in 2017 jumps to $12,000. For a married couple, it increases from $12,700 to $24,000 in 2018. Furthermore, the Act eliminated personal and dependent exemptions.
Don’t leave money on the table
Many business owners and individuals have been accustomed to ‘business as usual’ when filing taxes. After all, there have been no real changes in 33 years. For decades, they have relied on the same at-home tax preparation software. This is not a year to assume that was has worked in the past will still be good this year. If you want to reduce your tax liability – who doesn’t? – you should strongly consider contacting your local Tax or Accounting Office. To make sure you take advantage of all the available deductions, this may be perfect chance to make the switch to a professional, especially if you have complex tax issues.
Do I Need a CPA?
With all these new changes, you may need an expert to guide you through the process. This is our best advice in help you avoid mistakes and perhaps help lower your tax liability. Tax professionals don’t always have to be CPA’s. In fact, most people prefer a non-CPA to prepare their tax returns at a lower cost and a higher level of service. Check out TaxLeaf if you can. They have multiple locations throughout South Florida and Orlando. They understand tax credits and deductions. The best part, they’re human – unlike tax preparation software – and understand your situation best. Another bonus is that they offer a no-fee consultation, so stop by at your convenience and ask your toughest questions.
Accurate records = simplicity
Every year, millions of taxpayers struggle to keep better track of their income and expenses so they won’t be scouring through their filing cabinets and shoe boxes at midnight looking for receipts. TaxLeaf, founded in 1976, has been helping business owners and individuals with much more than tax return preparation. Their diverse professionals provide business owners with professional, accurate bookkeeping and payroll services. You’ll get access to
LeafCloud – a cool App that gives you online access to your most important tax documents and filings. No matter the language or the culture, TaxLeaf is here to help you this tax season. We have tax professionals that speak English, Spanish, Portuguese and Russian.
Ready or not, tax season is here. Do yourself a favor; let us help you get organized and compliant.