Steps to Take Now to Get Ready to File Your 2018 Tax Return
While holiday shopping may be on your mind, there are last-minute things you can do as the end of 2018 approaches to get ready to file your 2018 tax return in 2019.
Make sure your filing experience goes smoothly next year by planning ahead now. Taking these steps will also help them avoid surprises when you file next year. Here are six key tips:
1 – Do a W-4 Checkup
The Form W-4 determines how much federal income tax your employer withholds from every paycheck. Depending on your marital status and the number of allowances you select, you’ll have more or less tax withheld from each paycheck.
So, before the end of the year, check withholding number on W-4 forms. Your ideal number of allowances can change with common life events, such as a birth, marriage, graduation, home purchase or sale, or unexpected income. And due to recent tax reform updates through the Tax Cuts and Jobs Act, your withholding amount may be different from prior years.
With good planning, you can adjust your Form W-4 to meet your specific tax goals. To avoid surprises, do a Paycheck Checkup to decide if you need to adjust your withholding or make estimated or more tax payments now.
At this point, while it may be too late to do much with your 2018 withholding, it’s still a good idea to make sure your withholding works well for 2019. Also, if necessary, you can make a 2018 estimated tax payment to cover any significant shortfall.
2 – Start Gathering Tax Documents
To file an accurate tax return, one of the must-dos is to have all necessary tax and financial documents in place before you file a return. While it may seem early, gather financial statements, contributions, and prior-year tax returns so you can start thinking about filing your taxes.
3 – Confirm Your Mailing Address
Have you moved in the past year? If so, notify the IRS of your changed address. In addition, confirm that each employer, financial institution, or other payers have your current mailing address. While it’s last minute, it will save you the hassle of dealing with the change of address when it comes time to file. In January, you will start receiving year-end forms like your W-2 from employers, 1099s from banks and other payers, and 1095-As from the Healthcare Marketplace, so you want to make sure these important forms go to the right place.
4 – Get Educated on Tax Reform Changes
The Tax Cuts and Jobs Act overhauled many tax laws affecting income, credits, and deductions. Alternative Minimum Tax, the Child Tax Credit, Bonus Depreciation, Gift Tax, and tax brackets are just a few of the many impacted tax laws that changed from previous years. As 2018 ends, you may want to think about brushing up on the changes so you can claim the highest refund given your unique tax situation. For the best guidance, find an experienced tax advisor who can walk you through the impacts based on your unique life situation.
5 – Contribute to Charities
If you donate cash or property to charities by Dec. 31, 2018, and you expect to itemize deductions you can deduct the contributions on your 2018 tax return. Just remember to get a receipt from the charitable organization you’re donating to. The IRS may require you to substantiate those contributions by providing receipts and appraisals if you get audited.
6 – Spend Your FSA Funds
Flexible spending accounts (FSAs) cover common medical or dependent care costs. With these accounts, if you don’t use all your FSA funds by the end of the year, you could lose the rest.
If you have extra money in a health FSA to spend, you might want to schedule doctor or dentist appointments before the end of the year, or buy prescription medicine, hearing aids, or contact lenses.
If you pay these expenses with your personal funds instead of your FSA debit card, make sure you submit your receipt for eligible expenses within the time required by the plan. Some plans allow you an extra 2½ months after the end of the year to use the unspent amount, so check with your plan administrator to find out your deadline.
The runway for meaningful end-of-year tax strategies will shorten, so now is the time to do a quick tax review and forecast to get ready to file your 2018 tax return. Tax strategy is an important and often overlooked part of your financial big-picture, so make it a priority at year-end and into 2019!
For tax planning help, consult a trusted Tax Advisor. Find an office nearest you now!