With
all of the headlines about the changes to tax law, you probably have lots of
questions. Here are answers to some of the most common questions taxpayers have
this year.
Q.
I’m hearing about a lot of changes to 2018 taxes. What should I do?
A. You’re right, there are a lot of changes in 2018 due to the passage of the
Tax Cuts and Jobs Act (TCJA), including to the income tax brackets. The simple
answer to the question “What should I do?” is to not make any major changes
until you finish filing your 2017 taxes. Once you understand your 2017 tax
obligation, you are in a better position to plan for 2018.
However,
there are a few things you can start thinking about now. Depending on
where you fall in the new income tax brackets, you may want to consider ways to
lower your taxable income. This could include increasing your contributions to
401(k) retirement accounts or health savings accounts (HSAs). You’ll also want
to make sure your employer has adjusted your federal tax withholding so that
you don’t have to wait to receive a large refund (or tax bill) next year. You
can review the IRS withholding calculator using your latest pay stub data to make sure the
changes are accurate.
Q.
What is the penalty amount if I didn’t have health insurance in 2017?
A. The penalty per adult is calculated as the greater of either $695 or 2.5
percent of your yearly household income, up to a maximum of $3,264 for individuals
or $16,320 for a family of five or more. Note that the penalty is still in place for tax years 2017
and 2018. The TCJA eliminates the penalty for 2019 through 2025.
Q. Is
Social Security taxed?
A. It depends. You won’t pay tax on more than 85 percent of your Social
Security income, but how much gets taxed depends on your income bracket. If
your combined income is less than $25,000 for the year, you won’t pay tax on
Social Security income.
Q.
When is the last day to do my taxes?
A. Technically, Tuesday, April 17. But don’t wait until the last minute. Ask
for help to get started now, or to file an extension so you have time to
complete your tax return later. The sooner you file, the sooner you can get
your refund. It usually takes about three weeks to arrive from the date you
file. Also, remember you need to keep most tax related documents for at least
three years, so don’t toss your paperwork after you file.
Q.
The IRS contacted me, what should I do?
A. Ask for help. There are numerous scammers who impersonate the IRS during tax
season. The real IRS will never contact you via social media, email or text
message. In addition, an IRS agent will not contact you over the phone unless
you first receive official correspondence in the mail. If you have received a
notice in the mail, immediately ask for help to determine how to proceed.
These
are just a few of the questions people have during tax season. If you have
more, call us at (219) 769-3616 or email them to tlynch@swartz-retson.com.
