2018 LAST MINUTE TAX PLANNING

//2018 LAST MINUTE TAX PLANNING

2018 LAST MINUTE TAX PLANNING

By: Debra Rogers, Tax Management & Financial Horizons Staff

Several years ago, as I was entering W-2 data for a tax return of a single person, I noticed the withholding just didn’t look right. I didn’t say anything right away as I wanted to see how things would play out after entering deductions and credits. However, as I got to the bottom of Page Two of the 1040 had to break the bad news to him:  He owed $5,000 in taxes as his withholding hadn’t covered the amount due.

I did not relish the shock and surprise passing across his face! He tried to make light of the matter by stating he was about to keel over from a heart attack right in front of my desk. He half-heartedly joked that they would make a chalk outline of his body on the floor which would ominously frighten other clients away!

We discussed the obviously low amount of taxes withheld by his employer and after a while determined what had happened. In May of the prior year my client had worked a great deal of overtime and he’d contacted his HR department to adjust his W-4 allowances and decrease withholding per centage during that short, high earning period.

Unfortunately, through a combination of miscommunication with his HR and a lack of pay-stub scrutiny on his part, the temporary adjustment was never reversed.  For the remainder of the year his paycheck withholdings remained low resulting in the much larger than expected year end income tax payment due.

You may have noticed at the end of last year’s tax preparation there was an estimate made for future tax due based on the Tax Cut and Jobs Act of 2017. That estimate made many taxpayers happy to know that they qualified to pay fewer taxes this year. In fact, the estimations were based upon 2017’s withholding tables. Those tables changed in 2018 in order to spread the TC&JA tax changes throughout the year. Consequently, the larger tax refund which taxpayers may have calculated they’d receive has already been doled out through small increases to each paycheck.

As a result, you may end getting a smaller than usual refund. The tax savings have been coming all year long and you may even be surprised with an unexpected tax due when they file your 2018 return. To avoid owing more than you planned, take advantage of our knowledgeable staff at Tax Management and Financial Horizons. There is still time to prepare yourself with our Free Tax Health Check-up before January 15th. This service is normally a $40.00 charge, but if you book your appointment to file your 2018 tax return during your Tax Health Check-up, you’ll receive this service for free! Call 262-923-8100 extension 0 to schedule an appointment today. We’re here to help you! We certainly don’t want to see any chalk outlines of stunned taxpayers around our desks next April!

2018-12-07T19:14:10+00:00