(3) Key Updates To Be Aware Of For This Year’s Tax Season
“In this world nothing can be said to be certain, except death and taxes.”
Despite Benjamin Franklin’s famous words, the arrival of the this year’s tax season is bringing a lot of uncertainty and change. Among the most notable differences this year are the new tax reform provisions from the Tax Cuts & Jobs Act (TCJA) which went into effect on January 1, 2018. But even aside from this massive change, there are still many grey areas that need to be addressed as well as some key tax positions awaiting additional guidance from the IRS. All of these variables have lead to some big question marks for businesses and individuals looking to get their taxes done as efficiently and as cost-effective as possible. So with these changes in mind, here are some key updates to be aware of as we head into what may become the most unprecedented tax season ever.
#1) More Taxpayers Are Expected To Owe On Their Taxes This Year
Last year’s tax reform was generally believed to have produced more take-home pay for the vast majority of Americans. However, there was another side-effect which was not so beneficial for this same group of people. Because most employers withhold less taxes on behalf of their employees last year, many of them actually ended withholding too little in the process. Therefore, without any action on the individual taxpayer’s part to increase withholdings, it’s expected that many will end up with a liability this year instead of a refund. Just how many people will ultimately owe on their taxes remains to be seen. However, back in late 2018 it was estimated that 70% of taxpayers had not checked their withholdings to ensure they were paying enough in taxes. Furthermore, keep in mind that now is actually the ideal time to check your withholdings for next year when it comes to owing on your annual taxes.
#2) Another Government Shutdown Would Heavily Impact The IRS
Although a presidential bill was recently signed into effect to temporarily end our government shutdown, there is still a lot of uncertainty left behind. Aside from the fact that another partial shutdown could come as early as February 15th, roughly 80,000 of the federal workers affected would be IRS employees. This total represents nearly 10% of the entire federal workforce who would stand to miss out on their paychecks during another shutdown. Despite these concerning stats the IRS reported that it expects more than half of it’s staff to continue working throughout the tax season, regardless of any stoppages. But keep in mind that with the recent changes in tax reform, most experts already expected this year to be far more complicated than normal for the IRS. It’s also worth noting that during the previous 35-day government shutdown, all scheduled appointments related to audits, collections, and appeals were assumed to be cancelled according to the IRS website.
#3) Some Taxpayer Penalties Will Be Waived This Year
Another major update that came about suddenly this tax season was centered around estimated tax payments. Now the IRS has actually agreed to waive penalties for those who did not have sufficient taxes withheld as well as those whose estimated tax payments were too low in 2018. Prior to this agreement, the general IRS rule was that a taxpayer must withhold at least 90% of their final liability throughout the year to avoid penalties. However, this rule has now been amended so that the new threshold is 85% instead. And while on the surface this may seem like a rather small change in percentage, the bigger picture is that IRS clearly expects more people to owe as result of last year’s tax changes. Furthermore, with just this small, subtle change in tax policy, it could end up saving taxpayers a ton of money in unnecessary costs.
Finally, the key thing to keep in mind is that taxes can be extremely complicated, even for the best CPA’s and accounting professionals. So with all of the many changes and updates that are taking place it’s very easy to become overwhelmed and confused on your own. For that reason it may be in your best to get help from a trusted advisor this tax season, even if you would normally go it alone. After all this decision could end up saving you a lot of time and money in the long run.
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