The new Tax Cuts and Jobs Act will affect tax returns that taxpayers will file in 2019. This new law is responsible for several significant changes, including the exclusion of deductions for employee business expenses, investment expenses, investment management fees, and tax prep fees. The new law also limits deductions for state and local taxes as well as home mortgage interest deductions in specific situations.
It is important that professional tax preparers recommend that their clients review their paycheck withholding amounts as soon as possible so that they can adjust if necessary, giving more time for the withholding to spread out evenly throughout the year. Mitch Elbarki of Sigma Tax Pro gives fair warning, “…if taxpayers procrastinate in reviewing their paychecks with a professional to make needed adjustments, then fewer pay periods will be left to make any changes, resulting in a much more serious outcome with every unadjusted paycheck, leading to a potentially a larger tax bill or penalty by tax time in 2019.”
The Withholding Calculator, available on the IRS website, is the tool for the job. Using this calculator, tax professionals should urge their clients to collect their most recent pay stubs and most recent income tax return (Form 1040) to begin the review. Tax professionals should also advise their clients that if any other changes to their financial circumstances occur during the year, they need to contact them to assure the withholding amounts are still appropriate.
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