As the magic of holidays fades away, the new year also brings tax time for all of us. The new GOP tax bill drastically adds/removes incentives that could affect your paycheck and taxes. Homeowners are rushing to pre-pay the property taxes, Businesses are announcing bonuses for their employees, Tax agents are figuring out how the tax rules can be implemented, and others are waiting to file the taxes on the postcard!
The yearend also brings the burden of filing taxes. Procuring the 1099s, W2s, and documents consume individuals and make you wonder where did all the money go. 🙂 TurboTax has user-friendly self-guiding software which can show your taxes based on the information you provide. If you approach a local tax agent such as H&R Block, they can guide you through the filing. The agents enter your details into their tax software and complete the filing.
If you are itemizing you will be required to carry all proofs during filing. If there is an audit from the IRS, you have to re-submit your proofs. Wait until the end of January or February until you receive all the 1099s and W2s from the agencies. Tax agents and taxpayers are eagerly waiting for how the new GOP tax bill will change the taxes. Here are some general points to consider:
- Increased standard deduction:
- For married couples: Increase from $13, 000 to $24, 000.
- For individuals: Increase from $6500 to $12, 000.
- For single parents: Increase is from $9550 to $18, 000.
- Property tax exemption limited to $10, 000: This is a huge blow to high property tax states such as Illinois and New Jersey.
- I wonder why Scott County residents rushed to pre-pay the property taxes. They only pay $3600! Rock Island County does not accept pre-payment until the tax bill arrives in May. Illinois is already leading in people moving out and it may increase further in future. 🙂
- Taxes can be filed on a postcard: This will simplify the documentation required. However, the cost of the postcard is not revealed yet. 🙂
- Change in Payment: Payroll software providers are adjusting the tax withholding to accommodate the tax changes
- Child tax credit increased from $1000 to $2000 for the people with incomes up to 200, 000 (single parents) and $400, 000 (Married filing jointly). However, the child is required to have a valid SSN.
- Change in tax slabs: Corporate tax rate is flat 21 percent. Pass-through business owners or small business owners can deduct 20 percent of the income. Large businesses announced bonuses and higher contributions to charity due to the tax savings they get from the GOP tax reform. The different slabs for low-income, middle-income, and high-income have been set up.
IRS will not accept taxes until the end of January and if you are expecting a refund, you will not be seeing them until the end of February. The last day to file taxes is April 17 without penalty. The new GOP tax reform is from 2018 to 2025 and some are skeptical that after 2025, all the tax savings will be lost. For low-income earners, the taxes might reduce first but increase after 2025. Everyone is trying to understand how it will change and any hint of fewer taxes gives a huge relief for taxpayers. 🙂
Happy New Year 2018!