Surprised by your 2018 taxes?

Surprised by your 2018 taxes?

If you were like many Americans, you might have been surprised by either a smaller refund or a larger bill than you expected. 2017’s Tax Cuts and Jobs Act affected taxpayers in unexpected ways, especially if they weren’t working with advisors who could prep them for what was coming.

For example, the changes the IRS made to federal withholding tables in early 2018 meant many workers saw increases in their paychecks, as fewer taxes were taken out each pay period. Unfortunately, those same workers realized too late that it meant they might have a larger tax bill due this April.

If you’re looking for a last-minute hail-Mary for your 2018 return, here are two ways you might be able to  reduce what you owe the U.S. government:

  • If you have a Health Savings Account, you have until April 15 to top it off. Contributions to your HSA  are tax deductible.
  • If you meet the deduction limits, you also have until April 15 to max out your pre-tax IRA contributions ($5,500/person, or $6,500 if you are 50 or older).

If you weren’t on top of things in 2018, wake up in 2019! You still have nine months to plan ahead for next year. Here’s how you can get ahead of your 2019 taxes:

  1. Complete a 2019 tax projection. There’s no reason to wait until a year from now to be surprised again. Work with a tax advisor to estimate your 2019 taxes, so you can plan ahead.
  2. If you were woefully underwithholding for 2018, you have two options:
    • Adjust your withholding. Work with your payroll provider to lower your allowances to withhold more each pay period.
    • Pay quarterly taxes. Instead of getting hit with a big bill in April, make quarterly tax estimates to stay ahead of the game and avoid potential penalties. Work with an accountant to estimate how much you should be paying every three months.
  3. Do everything else you can to reduce your tax liability for 2019:
    • Contribute to a pre-tax retirement plan. Both IRA and 401K contribution limits went up in 2019. Make sure you know your contribution and deduction limits so you can max out your pre-tax savings.
    • Fill up your Health Savings Account. If your health plan qualifies for an HSA as a high-deductible plan, you have a whole year to contribute for additional tax savings.
    • If you’re saving for college expenses, set aside money in a 529 plan. These investment accounts let you earn tax-free interest on savings for education costs and can provide a state tax deduction.
    • Increase your giving. Explore options like “charitable chunking” to maximize the tax benefits of your generosity.
  4. Let us help you! If you got sideswiped by your 2018 tax bill, don’t let it happen again. Talk to one of our advisors. We’re happy to work with your existing accountant to make sure you’re set up for tax success in 2019.
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