The much-discussed tax bill is on the verge of officially becoming law. While economists and politicians continue to evaluate its short- and long-term impact on individuals, families and businesses, there are a handful of factors you should be aware of, and can begin thinking about today. Here are a few key takeaways.
The law itself, doesn’t have an impact on your 2017 taxes. Technically, the tax bill goes into effect in 2018, so all of the deductions and general tax filing strategies that you’ll undertake when filing this coming April still apply.
However … some changes in 2018 law may affect some of your final decisions on 2017 taxes. As one example, if you’re in a tax bracket where it makes sense to take advantage of the new standard deductions next year, you may want to increase charitable donations in the final days of this year, so that you can also benefit from itemizing your giving, before that option goes away.
If you’re a small business owner, make sure you’re classified correctly. One of the big benefits for small businesses is the new 20% income tax deduction that many “pass through” businesses will qualify for. Many S-Corps, LLCs, Partnerships and Sole Proprietors can pass income through from the business to their personal returns.
Don’t expect to see lower taxes on January 1. By passing this legislation into law so close to the end of the year, there’s no possibility that the measures will be able to take effect in January. The IRS needs to evaluate over 500 pages of law, interpret the information, and then issue formal guidance. Only then, will payroll professionals begin to know how to put the new law into action. For large payroll services providers, new software will need to be written to account for new tax brackets and withholding levels. It’s possible that every employee will need to resubmit a W-4 form (or its new equivalent), since the information needed by employers will change.
Consider working with a tax and payroll expert this year. As the new rules and regulations come into effect, it may be beneficial to work with certified professionals who can keep up with the guidelines, and understand how to apply them in your specific case. It’s unrealistic to expect a lay person to be able to stay current with all of the changes that are on the verge of becoming law. Your better solution might be to enlist a partner who understands your circumstances and has a clear interest in helping you get organized for 2017, 2018 and beyond.