2018 Tax Tips
• Collect W-2s, 1099s, and other information on income and deductions needed to prepare your 2017 tax return. Make your appointment for tax return preparation early to give you time to find any missing information and still meet the filing deadline.
• Check for errors when you receive your 2017 W-2s, 1099s, and other tax information forms. If there are errors, contact the sender immediately and request a corrected copy.
• Check the different filing options you can use on your 2017 tax return. Often a married couple can cut taxes by filing separately if one has lower income but higher medical expenses or other deductions. You have to work out the numbers each way to be sure.
• If you did not contribute the 2017 maximum to your IRA by December 31, 2017, and you make any IRA contributions prior to April 17, 2018, be sure to designate to your bank or other trustee that these 2018 contributions are for 2017 (up to the maximum allowed). You can then deduct these amounts on your 2017 tax return for a quicker tax benefit.
• Make your 2018 retirement plan contributions as early this year as possible in order to maximize your tax-deferred earnings.
• Don’t overlook any of the tax credits available to reduce your 2017 tax bill.
• Elect S Corporation status. If your sole proprietorship or partnership is producing a net profit in excess of a reasonable compensation for your time, you could save money by incorporating and electing S status. The deadline for making an election for calendar-year 2018 is March 15.
• If you had self-employment income in 2017, you can contribute to a SEP or a Keogh pension plan. (The Keogh had to be in place by December 31, 2017.) Contributions can be made up to the due date of your 2017 tax return, including extensions.
• Schedule your tax appointment well before the filing deadline. Afterward, you may need time to chase down missing records or resolve other problems before the deadline.
• Check for carryover items that could reduce your 2017 taxes. Check prior years for unused items such as capital losses, investment interest expense, business operating losses, and charitable contributions.
• Maximize your child care credit. If you and your spouse are both employed at full- or part-time jobs, make sure you get the maximum benefit from the child care credit. When calculating the credit, remember that you may be able to include the cost of day care, nursery school, babysitting, and summer day camp.
• You have until April 17 to make a 2017 contribution to your individual retirement account (IRA). If you don’t have an IRA, you can establish one and make your contribution by April 17. If your contribution is deductible, meeting the deadline can cut your 2017 taxes. Be sure to make clear to your bank or broker that the contribution is for 2017 even though you’re making it in 2018.
• Review your children’s 2017 tax filing requirements. If your child had wage income only during 2017, a tax return is required if wages exceeded $6,350. If your child earned less than $6,350 and employers withheld taxes, the only way to get the money refunded is to file a tax return.
If your child had net self-employment earnings of $400 or more in 2017, a return is required and self-employment tax is due. Income tax could be due if earnings exceeded $6,350.
If your child had both earned and investment income, a return is required if the total was more than the larger of (a) $1,050 or (b) earned income plus $350 (up to $6,350).
• Tax credits are too valuable to overlook. A tax credit is subtracted directly from the amount of tax you owe, unlike a deduction, which reduces your taxable income. That’s why a credit is always more valuable than a deduction. Credits available to claim on your 2017 tax return include child care, tuition, adoption, and energy improvements.
• If you can’t file your tax return by the April 17 deadline, use Form 4868 to get up to six additional months to complete your return. Even if you have no problem filing by April 17, requesting an extension might be a good idea in some situations, such as when you need more time to make certain employer-provided retirement plan contributions. Be aware that Form 4868 extends only the filing deadline. Any tax you owe is due on April 17.
The information on this site is general in nature and should not be acted upon in your particular situation without further details and/or professional advice. For assistance, contact our office.