With a new administration in place, there have already been several changes to the Tax Code and more are expected before year end. Therefore, it is especially important that individuals, married couples, small businesses, entrepreneurs and tax professionals take certain steps to plan for the upcoming tax season and avoid penalties and fines.
Retirement Plan Contributions
Employees who participate in an employer sponsored 401(k), Thrift Savings Plans, 403(b) or 457 plan are able to contribute up to $18,000 into their account. This contribution results in a decrease in taxes paid this year because contributions receive tax referred status. You should calculate your current contributions to figure out how much more you can add to your retirement account and add as much as possible before December 31st. Employer contributions can be made up until the date the business files it’s tax return.
Did You Have Health Care Coverage This Year?
The Affordable Care Act has not changed, but the level of enforcement of the tax implications has. This year, the IRS will reject electronically filed returns or suspend paper filed tax forms that fail to address whether they meet the health care requirements. If you declare that you or any of your family members were uninsured during 2017, you will incur a penalty. If you qualify under various hardship criteria, you can claim an exemption and avoid paying the penalty. That is why it is crucial for individuals and families to gather all of their documentation that proves coverage for each person in the household as well or be prepared to acknowledge each person who remained uninsured. If anyone in your family is uninsured, preparing the forms to make those declarations as well as see if you qualify for any of the exemptions to avoid paying the penalty.
Tax Code Revisions
While there has been considerable news concerning simplifying tax compliance, you should consider that the current U.S. Tax Code is 2.4 million words which is combined with 7.7 million words of IRS Tax Regulations and an additional 60,000 pages of tax related case law. This will not disappear with a few tweaks from congress. The proposed tax bill sponsored by the U.S. House of Representatives is 456 pages, most of which will add to the Tax Code. We still expect major changes to the Tax Code before year end and we will provide updates as changes are finalized.
Watch Out for Too Little Tax Withholding
Tax withholding adjustments may be necessary if there has been any changes in life that affect your filing status, credits or deductions. Not having enough taxes withheld from your paycheck results in owing more taxes or getting less of a refund
The New Year is a good opportunity to meet with your tax professional and begin planning to meet your tax goals. Contact Fricke & Associates, LLC at www.frickecpa.com or call 770-216-2226 for more advice.