31 Jul You Can Succeed At Managing A Wage Change & Your Taxes
Of the many life events you face, getting an increase in pay may be one of them. Then, the planning begins for the next big purchase, increasing savings or investing. Keep in mind that significant jumps in income can change your tax bracket. With this possibility in mind and the recent changes due to the Tax Cuts & Jobs Act, consider the below as you organize your tax situation:
Payroll Check-up – The Internal Revenue Service (IRS) has tools on its official website, www.irs.gov, such as the Withholding Calculator to help you estimate your income tax withholdings. Publication 505, Tax Withholding And Estimated Tax, is another resource to assist you with paying only the tax you owe.
Pre-tax payroll deductions – During your on-boarding with your employer, you may have been informed of pre-tax payroll deductions such as health insurance. These qualified deductions reduce the gross income amount included within the income tax computation.
Plan to qualify for a tax deduction and/or credit – Tax planning is a workflow for individuals and businesses. The caveat is that your tax strategy must be within the framework of the Internal Revenue Code. Review life events and/or business decisions that affect your tax situation often.
Meet with your accountant and/or financial advisor – There is a lot of information on the world wide web about taxes. However, partnering with a qualified professional is an option.
The recent tax reform legislation changed the federal tax brackets and rates. Certain businesses may qualify for the new Qualified Business Deduction. Also, a few deductions have been modified or phased-out. Many of these regulations are new and some are different; but, you can manage this process by being proactive and informed. Always consider that state tax rules may differ and Social Security and Medicare taxes may still have to be paid. Best wishes!