“There’s one for you, 19 for me…” Taxman-The Beatles
I really don’t mean to be a buzzkill here but…we interrupt this Christmas preparation season to bring you the following public service announcement. The end of the holiday season ushers in that lovely season here in the US affectionately (NOT) known as Tax Season. A little advance prep work now will help you avoid surprises later.
Here’s a checklist of items you should review:
- Withholding Checkup-the Internal Revenue Service (IRS) recommends a Withholding Checkup every year, but especially this year with all the recent changes made to the tax code. You can perform your checkup here-have your most recent pay stubs handy as you will need to key this information into the calculator. If you do find you’ve under withheld and will owe taxes, you can budget for that to make the payment. In addition, you should complete an updated W-4 and submit it to your employer. If you’ve overwithheld and are expecting a large refund, you should also complete an updated W-4. A large refund amounts to nothing more than you allowing the government to use your money for free.
- Contract Employment-one of the drawbacks of contract employment (such as driving for Uber) is the requirement to file and pay quarterly taxes. If your employer is not withholding for you, you will receive a 1099 form instead of a W-2 from them. If you expect your tax liability to be at least $1000 for 2018, you’re required to file quarterly tax payments. It’s a little confusing but it’s not a difficult process. Instructions and forms needed to submit your quarterly payments, as well as the due dates, can be found here. If you have questions you should consult a tax professional. You can also call the IRS but know ahead of time the wait time can be long, especially during filing season.
- IRA Contribution-if you have an Individual Retirement Account you can contribute up to $5500 per year, and if you’re over 50 you are allowed catch up contributions up to $6500 per year. If you have not yet reached your minimum contribution amount you still have time. Those minimum amounts are increasing in 2019-more information can be found here. Again, if you have any questions you should consult a tax professional.
- Charitable Contributions-with the increase in the standard deduction some fear that people will no longer contribute to charities since the tax deduction incentive has been taken off the table. My take on this-while having the tax deduction is nice, it’s not the primary reason for contributing to a charity. If you itemize, it’s a no-brainer. If you take the standard deduction, don’t let the lack of a deduction stop you from contributing to charity.
Tax law is confusing as heck on a good day and will have you tearing your hair out on a bad day, so it’s always advisable to be as prepared as you possibly can be. If you are not comfortable handling this on your own, now is the time to seek out a professional before they get swamped after the first of the year. NerdWallet has a great resource to help you find a good one.
We now resume our regularly scheduled Christmas season. Enjoy the season with the peace of mind that you’re ready for Tax Season when it arrives.
Be well and God Bless-until we meet again…