By ARP Tax Pro
Q. When can I file my return?
A. What this is really asking is, “When will the IRS start accepting returns?” The official date is January 28, 2019 for the 2018 Tax Year. With April 15 falling on a Monday, the IRS may allow an extra day or two but that will remain to be seen. It is better to plan ahead and file earlier, rather than later.
Q. Can you tell me about what the new Tax Cuts and Jobs Act of (TCJA) Act of 2017 really looks like?
A. What most people don’t realize is that the “new” Tax Cuts and Jobs Act of (TCJA) of 2017 has already been in effect for all of 2018. So, here’s what the actual brackets look like:
Q. Can we still “itemize” our deductions?
A. The short answer is yes…but with the new standard deductions increased to $12,400 for singles, $24,000 for married filing joint and $18,000 for head of household, itemizing sometimes does not match or equal the larger standard deduction. It’s very important that your preparer actually do the math and ask you plenty of questions to decipher which method will work best for you and your situation.
Q. Can you please elaborate about the notion of allowing the IRS to use your money interest-free?
A. This is great question because what it’s really asking is “Do you know the cost of your tax refund?” You certainly would not lend your money to someone without some sort of a “pay-back” schedule along with a reasonable rate of return, would you? Well, that is exactly what you’re doing when you get a refund at tax time. You are giving the government an interest-free loan of YOUR money. Rather, you could invest those dollars even into a conservative investment that would far outweigh getting a zero rate of return! There are mathematical ways to virtually “figure” what your return (or the amount you owed) is to within pennies!
Q. So, could the same be asked about tax deductions as well?
A. The same question of “Do you know the cost of your tax deduction?” could be asked! This is also a great question because there is a marked difference between a “deduction,” which reduces the amount of tax owed on your overall income (for example: you earn $50,000 and you contribute $10,000 to a 401k, therefore, $40,000 is the “new” taxable amount) and a Tax “credit” which literally reduces the amount of tax owed dollar for dollar. Some common tax credits are: the tax credit for child and dependent care expenses, education tax credits and the earned income tax credit, just to name a few.
Q. Is it true that you and your money have a silent partner?
A. Lastly and maybe most importantly, YES! His name is Uncle Sam. And he’s greedy, stubborn, selfish and a horrible listener! You do have a choice, though, to pick another partner. You’ll still have to pay some form of tax, but by choosing the “right” partner and implementing the right tools, you can significantly reduce your tax obligation not just this year, but year after year after year! Choose wisely whom you work with.