2018. The Year of Smaller Tax Refunds.
Yes, it’s a sobering reality (and one that we hate to admit), but 2018 is currently shaping up to be the year of smaller tax refunds.
Based on data from early filers in both February of 2018 and 2019, the average refund is down 8.7% according to the Internal Revenue Service.
A large part of this drop can be attributed to the fact that a lot less money was withheld from work checks over the course of the last year. If you were a W2 employee in 2018, you may have been pleasantly surprised by consistently larger paychecks; however, the downside to this spike is a smaller payout at year end.
There has also been a significant shift in regard to deductions that are being accepted by the IRS because of the Standard Cuts and Jobs Act (TCJA) that went into effect on January 1, 2018.
This Act was a product of Trump’s new administration, lowering tax rates for businesses and individuals while also providing a break to self-employed people, but it also eliminated popular deductions. If you find yourself in the former category, you may, in fact, be part of the few who see your tax burden decline; however, the Government Accountability Office expects about four million people to pay more.
This higher payment is a direct result of a few notable changes:
The state and local property tax deduction (SALT) is now limited to $10,000 collectively.
The casualty and theft loss deduction has been repealed, except for taxpayers who suffer a loss due to a disaster area declared by the U.S. president.
Personal exemptions have been eliminated from the tax code.
These changes alone are a glaring reminder as to why hiring a professional to help during tax season can be a fruitful choice. While you may have been able to survive in the past by filing your own paperwork, the significant changes for this year might be the catalyst to enroll some assistance.
Most tax preparers are good at just that, preparing taxes, which may be sufficient for your needs if you have few deductions and simply need assistance with this year’s changes. To find someone who is more proactive, someone who can actually counsel you on best practices and offer advice on your filing, will require more legwork. When shopping around for a tax advisor that’s right for you, we recommend three basic steps.
Asking for recommendations through your network should be your first step in finding a tax preparer that is going to mesh well with your needs and personality.
Study the Website
While the infamous quote says to not judge a book by its cover, this is nearly impossible in our current digital world. Look at the website, whether he or she is an independent contractor or part of a firm, and evaluate how this appearance aligns with your personal goals.
Don’t settle for nice. Hire qualified. Often times, taxes are left to the last minute and you are forced to hire out of necessity. Start questioning viable contenders as soon as possible so that you have enough data and answers to confidently support making a choice. Also, compare fees. Tax advisors generally charge by the hour; if you run into one who charges by the size of your refund, be leery. In addition, reconsider any tax advisor that doesn’t offer e-filing. Any paid advisor that does more than 10 returns must e-file, so someone who does not offer this service is not doing nearly as many returns as you might be led to believe. Finally, understand whether or not the tax advisor can go to bat for you in the unlikely case that you are audited; not all tax professionals are equal in the eyes of the law, so be fully aware whether or not the person you hire would be authorized to plead on your behalf.
For a free consultation to assist in the filing of your 2018 tax returns, please fill out the form below and Joseph or Carlos from Crunch Tax Services, LLC will respond shortly.