In 2017, Congress passed the Tax Cuts and Jobs Act. This act made changes that will likely affect how you (or your tax preparer) handles your 2018 income tax return.
Key points to note about the Tax Cuts and Jobs Act
- The standard deduction is higher. For 2018, the deduction goes to $12,000 for a single filer, $18,000 for heads of household and $24,000 for married persons who file jointly.
- There are fewer deductions. This will make itemization more difficult. This may be bad for some, but good for others due to the increase in standard deduction.
- Many will see lower tax brackets.
- Limitation on state and local tax (SALT) exemptions. Only $10,000 can be deducted for 2018.
- The mortgage interest deduction can only be deducted on amounts up to $750,000. This could be a tricky calculation if you itemize and have a larger mortgage.
- Higher child tax credit and an increase in the income limit to be eligible for the credit.
- Those caring for dependents other than children, such as an elderly parent, may qualify for a $500 credit.
With these changes, should I hire a tax preparer for my 2018 taxes?
While many prefer to use tax preparation software to file taxes, some may want to hire a tax preparer given these recent changes. You’ll want to ensure you’re optimizing your return in every way possible and having an expert on hand can help.
Things to be aware of when hiring a tax preparer
- Be wary of tax preparers who claim they can obtain larger refunds than others, or who claim they can always get you a refund.
- Avoid tax preparers who base their fees on a percentage of the refund.
- Use a reputable tax professional who signs the tax return and provides a copy.
- Consider whether the individual or firm will be in business months or years after the return has been filed, to answer questions about the tax return’s preparation.
- Check the preparers’ credentials. Only attorneys, CPAs and enrolled agents can represent taxpayers before the IRS in all matters. This includes audits, collections and appeals. Beginning with tax returns signed after December 31 2015, the only other tax return preparers with any representation rights will be those who participate in the IRS Annual Filing Season Program. These preparers are limited to representing taxpayers whose returns they prepared and signed — and only in initial audits, customer service matters, and before the Taxpayer Advocate Service.
- Find out if the return preparer is affiliated with a professional organization that provides its members with continuing education and other resources — and holds the preparer to a code of ethics.
- Verify the preparer has an IRS Preparer Tax Identification Number (PTIN). Only a preparer who has a valid PTIN is authorized to prepare federal tax returns for compensation.
Other helpful tips for preparing your 2018 tax return
- Check with your financial advisor. You should review other places you may have financial assets to verify you have all your tax reporting statements on hand.
- Remember — you may be eligible to contribute to a 2018 IRA or Roth IRA through April 15, 2019!
- If you had a Health Saving Account (HSA) established in 2018 and did not contribute the maximum, you may be able to add to it as well prior to April 15, 2019.
- Check your 1099 tax reporting statements to be sure you have the final version prior to filing. Your financial institution must distribute tax forms by a certain deadline. Data on some of your investments may not have been available in time to meet this deadline. In this case, a report is still issued but should indicate that it may not be the final version.
Good luck in preparing your 2018 taxes, and make sure to get in touch with your financial advisor!
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.