PLEASE THINK ABOUT THIS!!
If you overestimate on your tax withholdings, you'll get a refund. That may sound GREAT but this means you have effectively used the IRS as a zero-interest savings account for the past 12 months.
"Our rule of thumb is to have at least 10 percent of your income taken out of your income."
Your main goal should be to get as close to zero as possible.
THE AVERAGE REFUND IS WORTH THOUSANDS
As of March 2, 2018 the average income tax refund was $3,046, according to the Internal Revenue Service. With about 59 million individual returns processed, the IRS has paid out more than 48.4 million refunds. THE AVERAGE REFUND IS WORTH THOUSANDS
DID YOU KNOW??
When you're self-employed, you are, in fact, operating a small business. A self-employed individual can deduct many expenses as a small business owner that aren't necessarily available to employed individuals.
Deductible business-related expenses include:
1. Home office supplies
2. The use of your vehicle for business travel
3. Personal computers and software
4. Meals and entertainment
5. Accounting and legal fees
7. Education and professional association dues
THE IRS OFFERS THESE FACTS FOR THOSE WORKING SEASONAL JOBS AND OTHER PART-TIME EMPLOYMENT
1. NEW EMPLOYEES
When a person gets a new job, regardless of the duration, they need to complete a Form W-4, Employee’s Withholding Allowance Certificate. Employers use this form to calculate how much federal income tax to withhold from an employee’s pay.
The Tax Cuts and Jobs Act made changes to the tax law, including increasing the standard deduction, eliminating personal exemptions, increasing the child tax credit, limiting or discontinuing certain deductions and changing the tax rates and brackets. These changes will affect 2018 tax returns filed next year.
Any changes that a part-year employee makes to their withholding can affect each paycheck in a larger way than employees who work year-round.
The Withholding Calculator, a special tool on IRS.gov, can help taxpayers with part-year employment estimate their income, credits, adjustments and deductions more accurately and check if they have the right amount of tax withheld for their financial situation.
The IRS encourages taxpayers who work seasonal jobs or are employed part of the year to visit the Withholding Calculator and perform a “paycheck checkup.”The IRS offers these facts for those working seasonal jobs and other part-time employment.
2. SELF EMPLOYED
Some workers are considered self-employed and responsible for paying taxes directly to the IRS. One way to do that is by making estimated tax payments during the year.
The Tax Cuts and Jobs Act changed the way tax is calculated for most taxpayers, including those with substantial income not subject to withholding. As a result, many taxpayers may need to raise or lower the amount of tax they pay each quarter through the estimated tax system.
The revised estimated tax package, Form 1040-ES, on IRS.gov is designed to help taxpayers figure these payments correctly. The package includes a quick rundown of key tax changes, income tax rate schedules for 2018 and a useful worksheet for figuring the right amount to pay.
3. TIP INCOME
Taxpayers earning tip income need to report it. It’s a good idea to keep a daily log for accurate reference when working any position, permanent or temporary, that involves tips. Note: taxpayers need to report cash tips of $20 or more during any single month to their employer.
Publication 531, Reporting Tip Income, has more information about reporting tip income correctly.
4. PAYROLL TAXES
At times taxpayers may earn too little from their seasonal work to owe income tax. But, employers usually must withhold Social Security and Medicare taxes from their pay, even if taxpayers don’t expect to qualify for these benefits.
If a taxpayer is self-employed, they generally must pay Social Security and Medicare taxes due.
These taxes pay for benefits under the Social Security system.
The new standard deduction is a double-edged sword: lowering your taxable income while taking off the table deductions you might have claimed in the past.
How it helps
The standard deduction for tax year 2018 will be nearly double what it was for 2017. For taxpayers who claim the standard deduction this year, this basically means that less of their income will be subject to federal income taxes. For example, a married couple filing a joint tax return next year will not be taxed on the first $24,000 of their 2018 income — compared with not being taxed on the first $12,700 of their 2017 income.
How it hurts
Far fewer taxpayers are expected to itemize their tax deductions — rather than claim the standard deduction — next year. Congress’ Joint Committee on Taxation has estimated that only about 18 million returns will include itemized deductions for tax year 2018 — down from 46.5 million for tax year 2017.
It generally only makes sense to itemize deductions if the total amount of your itemized deductions exceeds the amount of your standard deduction. But such cases will be less likely with some deductions ended, suspended or limited, and with the standard deduction higher under the revised tax code.
According to the IRS, itemized deductions can include:
1. Medical and dental expenses
2. State and local taxes
3. Mortgage interest
4. Donations to charity
So, if you are among the millions of taxpayers who itemized deductions for 2017 but will take the standard deduction for 2018, you no longer will be able to write off these expenses next April.