Here are their suggestions:
Revise W-4s before year-end to more closely match remaining withholding for the year to expected tax obligations. The savings that taxpayers might anticipate might have already been given to them through withholding. If they’ve been receiving a bigger paycheck, it won’t be there — or worse, they may owe money.
If a small-business client is eligible for the 20 percent deduction for pass-through entities, determine whether there are any changes in the compensation structure they can make that will maximize the deduction.
With the new higher income limits for individuals exposed to the Alternative Minimum Tax, more taxpayers will have the opportunity to recapture the AMT paid in prior years. Tax professionals can 9/17/2018 10:17:53 calculate AM prior years’ AMT credit now and the taxpayers affected can reduce their withholding and enjoy the benefit early.
Maximize retirement plan contributions before year end. This is a perennial suggestion, as far too many taxpayers fail to make the most of their 401(k)s and other savings accounts.
Sell stocks that may produce a loss. Taxpayers can deduct up to $3,000 ($1,500 for married filing separately) of their excess losses, which reduces overall income. If the taxpayer sold stocks that resulted in a gain, selling stocks that produce a loss will offset the gain.
Review flexible spending accounts to determine if the account balance can be used before the plan’s deadline. Funds not used by the account deadline will be lost, so taxpayers need to schedule medical appointments, buy new glasses, or buy health care items covered by FSA.
Advise clients who buy, sell or mine cryptocurrency to get accurate records in order. Taxpayers without accurate records could be subject to higher-than-normal gains.
Make sure an S corporation owner’s salary meets the “reasonable compensation” standard — what they would need to pay someone else to do the job they do. If they have not taken a salary, they should do so by the end of the year.
‘It is all about the taxpayer, and there will be taxpayers pleasantly surprised by the tax changes of the TCJA and those that will be woefully disappointed and need to make accommodations for what may amount to a balance due rather than a refund next April.’
Compare reduced itemized deductions to which the taxpayer might be entitled this year to the new standard deduction. If they won’t benefit from increasing itemized deductions such as charitable contributions (because the standard deduction will be greater), they can consider bunching charitable contributions into every other year, setting up a donor-advised fund, or, if over 70-1/2, making charitable contributions through IRA distributions.
If they are taking the deduction this year, they can add to it by cleaning out closets, dressers and storage areas and donating unused items to charitable organizations such as Amvets, Goodwill and the Salvation Army.
For those subject to the $10,000 deduction cap on state and local taxes, they should preserve real estate tax deductions by allocating to a business return whenever possible.
Enhance insurance coverage due to the loss of personal casualty and theftloss deductions that are not part of federally declared disasters.
Buy an SUV or truck that is heavier than 6,000 pounds for a business to take bonus depreciation of up to 100 percent of the cost of the vehicle.
If the client has purchased or is purchasing real estate by year’s end to rent out or use in business, do a cost segregation study so they can capture the bonus depreciation on land improvements and contents of the building.
If a client is in the middle of a divorce, finalize the divorce before the end of 2018 so they will be able to deduct alimony paid to their spouse. If the client will be the recipient of the alimony, they might want to put off finalizing the divorce or cut a deal to increase payment — after 2018 they won’t pay tax on the alimony.
Our thanks to Sheila Clark, director of The Income Tax School; Tynisa Gaines, assistant director of The Income Tax School; Roger Harris, president of Padgett Business Services; Mark Luscombe, principal federal tax analyst for Wolters Kluwer; Mike Mccarthy, principal at Rehmann; Cathy Mueller, director of operations for Peoples Income Tax; Tom Wheelwright, chief executive of Wealthability; and Beanna Whitlock, a San Antonio-based practitioner and educator and former IRS director of National Public Liaison.