How will this impact you?
Recently a local reporter provided the opportunity to analysis some tax data. She had stated to her it all looked good but she was not a tax professional and would I be willing to review this data. I thought what could it hurt? There has been very conflicted information offered to taxpayers in recent month and frankly tax professionals who are used to annual changes are working to stay current. Read more
Consider several wage earners of varying income looking to understand the impact of the Tax Cuts & Jobs Act (TCJA). I thought this was going to be the ideal case study to show some simple comparisons. However, the data was not consistent in preparation method across all income ranges, these were not all wage earners. Therefore, the bottom line results would not reflect a true comparison – the public (very generally speaking) may not understand income source is the essence in tax treatment and/or calculation.
So, the earners in the data provided to me were not all W-2 wage earners. $80K and below were wage earners. Those with income over $100K through $800K had a Qualified Business Income source which may benefit from an “Up to” 20% QBI deduction introduced in the TCJA – the deduction is limited for married couples whose combined taxable income is great than $315K and $157.5K for single taxpayers. This is key information when making a comparison.
Additionally, directions on how the TCJA will be applied in some cases is still developing. The Qualified Business Income (QBI) deduction is one area – a very BIG one. Just last week the Internal Revenue Service (IRS) published a statement they promise to revisit the form W-4, confirming that they will not release a 2019 version. Form W-4 is a very basic need for taxpayers but with varying individual needs the simplification of the form is proving a more complex task. Consequently, taxpayers may not be withholding correctly. The IRS advises taxpayers to take advantage of the new Withholding Calculator which reflects changes under the new tax law. (You can find the new withholding calculator on the IRS website here.)
To my original point, when discussing tax changes, seeking tax advice or talking to your tax professional, be sure to ask direct questions – vague comparisons or generalities only create more confusion and produce poor comparisons. Have you had a tax check-up?