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Three things to know to prep for your 2018 tax returns

Getting ready to file your 2018 tax returns with the Internal Revenue Service (IRS)? If so, you have likely noticed the process is a bit different this year. 2017 marked some big changes — most notable in the tax world the passage of the Tax Cuts and Jobs Act (TCJA). This new law was the biggest reform to the United States Tax Code in decades.

Although there are many changes, three specific things to note before beginning your returns include:

  • Deductions gained and lost. The TCJA resulted in an increase to the standard deductions. The law almost doubled the deduction, now set at $12,000 for those filing a single return and $24,000 for those who file a married, joint tax return in 2018. However, the increase did not come without a price. The TCJA also removed other deductions, like the ability to take personal or dependent deductions for a spouse and each child.
  • Credits adjusted. A number of tax credits were also changed. One example: the child tax credit. This credit is now set at $2,000 per child under the age of 17. This is almost double the rate set for previous tax years.
  • Withholding reminder. The IRS also reminded taxpayers that these changes could impact the required withholding payment. As such, taxpayers may need to adjust their withholdings. A failure to pay the right amount, as discussed in a previous post available here, can result in penalties. However, the IRS has shown some leniency and stated it would refrain from penalizing those who failed to meet their withholding obligations in 2018 as long as their withholdings covered 85 percent of their tax bill. Those who notice their withholdings were off in 2018 are wise to make adjustments to avoid penalties in 2019.

Tax payers who find that a misstep has resulted in notification of an audit are wise to seek legal counsel. An attorney experienced in IRS audits can help to defend your rights and protect your interests during the process.

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