In late 2017, the government rolled out the Tax Cuts and Jobs Act (TCJA), which made some significant changes for tax preparation in Des Moines, IA and across the nation. This April, you’ll be filing your taxes using the new tax rules outlined by the TCJA, and some of the changes might surprise you.
Not only is it important to stay informed about the newest tax changes to understand this year’s tax returns, but it’s crucial for planning ahead for next year, too. It’s too late to adjust your withholding and plan for tax filing for the 2018 tax year, but you can make changes for this year to make the most of your returns in 2020.
Before we dive in, we want to make some terms clear. When you’re thinking about the term “tax year,” you must remember that it is the year in which you made taxable wages. The “2019 tax year” refers to the year beginning January 1, 2019 (this year). It does not refer to what you are filing for this April. You will file for the 2019 tax year in the year 2020.
Understanding 2019 tax law changes
For the most part, the tax rules enacted under the TCJA will remain the same for the 2019 tax year and beyond. However, there will be some minor changes made by the IRS to adjust for year-over-year inflation.
The standard deduction that was raised for the 2018 tax year is being increased slightly. Single filers will see an increase from $12,000 to $12,200, and married couples filing jointly will see an increase from $24,000 to $24,400. The tax brackets have also experienced slight changes.
Additionally, beginning in 2019, there will no longer be a penalty for not having health insurance coverage. This was introduced in the TCJA but was not applicable through the 2018 tax year.
Overall, the 2019 tax year should not look much different than the 2018 tax year for a majority of people. However, it’s still important to be aware of the year-to-year changes so you can make necessary adjustments in your financial planning if you estimate you’ll be affected.
How to prepare yourself for next year’s tax season
If you don’t anticipate your earnings changing much from 2018 to 2019, you can use your 2018 tax returns to estimate your liability or returns for 2019. Don’t rely on your 2017 tax returns, as those payments will have occurred before the new tax law went into effect.
If you anticipate making more money in 2019, it might be a good idea to adjust your withholding on your W-4. This is also a good idea if you never adjusted it in 2018 after the TCJA went into effect. Adjusting your withholding will help ensure you don’t owe more money during tax season.
If you believe an adjustment is necessary, you’ll want to make it as soon as possible so the change affects all remaining paychecks in 2019. The IRS has a withholding calculator you can use online to identify how to adjust your withholding. Alternatively, you could check in with an expert in tax preparation in Des Moines, IA for financial planning advice.
The best way to prepare for the 2018 tax year and next year’s is by working with an experienced accountant who has experience in tax preparation. Accounting & Tax Professionals, PLC is here to help. Contact us today for assistance in filing your 2018 tax returns, as well as setting yourself up for success throughout the 2019 tax year and beyond.