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Got a big tax refund? Use IRS Withholding Calculator to boost take-home pay in 2018

WASHINGTON – Taxpayers who received large refunds earlier this year may be able to get more of their money included in their paychecks during the rest of 2018 by using the Withholding Calculator on IRS.gov.

According to the Internal Revenue Service, most taxpayers – more than seven out of 10 –  receive refunds averaging around $2,800. Typically, taxpayers who receive large refunds could receive more of their money throughout the year, rather than waiting until they file their tax return after the end of the year.

Tax reform has big impact

The Tax Cuts and Jobs Act, enacted in December, made major changes to the tax law. Any of these far-reaching changes could have an impact on the refund many taxpayers will receive when they file their 2018 tax return. The IRS encourages every employee, including those who typically receive big tax refunds, to do a “paycheck checkup” soon to ensure they have the appropriate amount of tax taken out of their pay.

TCJA changes that could have a big impact on tax refunds this year include:

Reduced tax rates and changed tax brackets.

Eliminated personal exemptions.

Increased standard deduction.

Expanded and increased Child Tax Credit.

A new credit for other dependents.

Some limited or discontinued deductions.

Do a ‘paycheck checkup’ soon

The IRS urges taxpayers to complete their “paycheck checkup” now so that if a withholding amount adjustment is necessary, there’s more time for withholding to take place evenly throughout the year. Waiting means there are fewer pay periods to withhold the necessary federal tax – so more tax will have to be withheld from each remaining paycheck.

Adjusting withholding can prevent taxpayers from having too little tax or too much withheld. Too little withheld could result in an unexpected tax bill or penalty at tax time in 2019.

Using the Withholding Calculator

It’s helpful if taxpayers have their completed 2017 tax return available when using the Withholding Calculator to estimate the amount of income, deductions, adjustments and credits to enter. Filers also need their most recent pay stubs to compute the employee’s withholding so far this year.

Calculator results depend on the accuracy of information entered. If a taxpayer’s personal circumstances change during the year, they should return to the calculator to check whether their withholding should be changed.

Employees can use the results from the Withholding Calculator to help determine if they should complete a new Form W-4 and, if so, what information to enter on a new Form W-4.

Taxpayers who change their withholding for 2018 should recheck their withholding at the start of 2019, especially those who reduced their withholding sometime in 2018. A mid-year withholding change in 2018 may have a different full-year impact in 2019. Taxpayers who do not file a new Form W-4 for 2019, may have a higher or lower withholding than intend. To help protect against having too little withheld in 2019, IRS encourages all filers to check their withholding again early in 2019.

The Withholding Calculator does not request personally-identifiable information, such as name, Social Security number, address or bank account number. The IRS does not save or record the information entered on the calculator. As always, taxpayers should watch out for tax scams, especially via email or phone and be alert to cybercriminals impersonating the IRS. The IRS does not send emails related to the Withholding Calculator or the information entered in it.

Adjusting withholding

Employees who need to complete a new Form W-4 should submit it to their employers as soon as possible. Employees with a change in personal circumstances that reduce the number of withholding allowances must submit a new Form W-4 with corrected withholding allowances to their employer within 10 days of the change.

Taxpayers may also need to determine if they should make adjustments to their state or local withholding. They can contact their state's department of revenue to learn more.

IRS.gov/getready has information about steps taxpayers can take now to get a jump on next year’s taxes, including how the new tax law may affect them.

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IRS issues proposed regulations on new 20 percent deduction for passthrough businesses

WASHINGTON — The Internal Revenue Service issued proposed regulations today for a new provision allowing many owners of sole proprietorships, partnerships, trusts and S corporations to deduct 20 percent of their qualified business income.

The new deduction -- referred to as the Section 199A deduction or the deduction for qualified business income -- was created by the Tax Cuts and Jobs Act. The deduction is available for tax years beginning after Dec. 31, 2017. Eligible taxpayers can claim it for the first time on the 2018 federal income tax return they file next year.

The deduction is generally available to eligible taxpayers whose 2018 taxable incomes fall below $315,000 for joint returns and $157,500 for other taxpayers. It’s generally equal to the lesser of 20 percent of their qualified business income plus 20 percent of their qualified real estate investment trust dividends and qualified publicly traded partnership income or 20 percent of taxable income minus net capital gains.

Deductions for taxpayers above the $157,500/$315,000 taxable income thresholds may be limited. Those limitations are fully described in the proposed regulations.

Qualified business income includes domestic income from a trade or business. Employee wages, capital gain, interest and dividend income are excluded.

In addition, Notice 2018-64, also issued today, provides methods for calculating Form W-2 wages for purposes of the limitations on this deduction. More information may be found at www.IRS.gov.

Taxpayers may rely on the rules in these proposed regulations until final regulations are published in the Federal Register.

Written or electronic comments and requests for a public hearing on this proposed regulation must be received within 45 days of publication in the Federal Register

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Form 1040 Redesign

The IRS released the newly redesigned 2018 Form 1040 and associated schedules on June 29, 2018. The redesigned Form 1040, about half the size of the 2017 (current) version, will also replace the Form 1040A and 1040EZ for the upcoming 2019 filing season.

The 2018 Form 1040 has been streamlined to only include the five most common types of income, federal withholding, EITC, Additional Child Tax Credit and the Education Credit. The detail for all other types of income, adjustments to income, nonrefundable, refundable credits, other payments and other taxes that exist on the current Form 1040 have been moved to one of six new schedules:

                Schedule 1 (Additional Income and Adjustments to Income)                  

                Schedule 2 (Tax) – Includes all lines that are used to calculate total tax such as the regular tax, tax on child’s unearned income, alternative minimum tax, etc.

                Schedule 3 (Nonrefundable Credits) – Includes all nonrefundable credits such as credit for child and dependent care expenses, education credits, child tax credit and the new credit for other dependents, etc.

                Schedule 4  (Other Taxes) – Includes all other taxes such as self-employment tax, household employment tax, etc.

                Schedule 5 (Other Payments and Refundable Credits) – Includes the lines for other payments and refundable credits such as extension payment, credit for federal tax on fuels, etc.

                Schedule 6 (Foreign Address and Third Party Designee) - Where foreign address and third party designee information is shown if they are applicable.

                                  Includes the remaining income types such as from Schedule C, D, E and F, unemployment compensation, etc. that were shown on the current Form 1040.

                  All adjustments to income such as Educator expenses, IRA contributions, student loan interest, etc.

                 The IRS has explained that the version of the newly redesigned form released on June 29 is a pre-release draft and the IRS will be working with the tax community to finalize the Form 1040 over the summer. The final version of the form will be released towards the end of this year.

The draft of the 2018 Form 1040 also includes changes that are a result of the Tax Cuts and Jobs Act such as:

                Removal of exemption amount boxes and the total exemptions line.

                Addition of check box for the new credit for other dependents for each dependent.

                New line 9 for the new qualified business income deduction (20% deduction for pass-through business income – Sec 199A).

               For additional information on the redesign of the Form 1040 see IRS news release -– IRS Working on a New Form 1040 for 2019 Tax Season.

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Veterans owed refunds for overpayments attributable to disability severance payments should file amended returns to claim tax refunds

WASHINGTON — The Internal Revenue Service today is advising certain veterans who received disability severance payments after January 17, 1991, and included that payment as income that they should file Form 1040X, Amended U.S. Individual Income Tax Return, to claim a credit or refund of the overpayment attributable to the disability severance payment.

This is a result of the Combat-Injured Veterans Tax Fairness Act passed in 2016.

Most veterans who received a one-time lump-sum disability severance payment when they separated from their military service will receive a letter from the Department of Defense with information explaining how to claim tax refunds they are entitled to; the letters include an explanation of a simplified method for making the claim. The IRS has worked closely with the DoD to produce these letters, explaining how veterans should claim the related tax refunds.

Statute of Limitations

The amount of time for claiming these tax refunds is limited. However, the law grants veterans an alternative timeframe – one year from the date of the letter from DoD. Veterans making these claims have the normal limitations period for claiming a refund or one year from the date of their letter from the DoD, whichever expires later. As taxpayers can usually only claim tax refunds within 3 years from the due date of the return, this alternative time frame is especially important since some of the claims may be for refunds of taxes paid as far back as 1991.

Amount to Claim

Veterans can submit a claim based on the actual amount of their disability severance payment by completing Form 1040X, carefully following the instructions. However, there is a simplified method. Veterans can choose instead to claim a standard refund amount based on the calendar year (an individual’s tax year) in which they received the severance payment. Write “Disability Severance Payment” on line 15 of Form 1040X and enter on lines 15 and 22 the standard refund amount listed below that applies:

$1,750 for tax years 1991 – 2005

$2,400 for tax years 2006 – 2010

$3,200 for tax years 2011 – 2016

Claiming the standard refund amount is the easiest way for veterans to claim a refund, because they do not need to access the original tax return from the year of their lump-sum disability severance payment.

Special Instructions

All veterans claiming refunds for overpayments attributable to their lump-sum disability severance payments should write either “Veteran Disability Severance” or “St. Clair Claim” across the top of the front page of the Form 1040X that they file. Because all amended returns are filed on paper, veterans should mail their completed Form 1040X, with a copy of the DoD letter, to:

Internal Revenue Service 333 W. Pershing Street, Stop 6503, P5 Kansas City, MO  64108

Veterans eligible for a refund who did not receive a letter from DoD may still file Form 1040X to claim a refund but must include both of the following to verify the disability severance payment:

A copy of documentation showing the exact amount of and reason for the disability severance payment, such as a letter from the Defense Finance and Accounting Services (DFAS) explaining the severance payment at the time of the payment or a Form DD-214, and

A copy of either the VA determination letter confirming the veteran’s disability or a determination that the veteran’s injury or sickness was either incurred as a direct result of armed conflict, while in extra-hazardous service, or in simulated war exercises, or was caused by an instrumentality of war.

Veterans who did not receive the DoD letter and who do not have the required documentation showing the exact amount of and reason for their disability severance payment will need to obtain the necessary proof by contacting the

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3 Essential Rules For Every Aggressive Growth Investor

Every intelligent investor's portfolio must devote assets to aggressive growth.

No exceptions.

Because finding a winning aggressive growth stock isn't easy, I want to share with you how I do it...

I look for companies with products, technologies or other innovations that materially change the baseline assumptions for doing business in an industry.

These are the companies seeking to hit one out of the park by finding The Next Big Thing.

You see, I have a knack for this. I don't mean to brag, but in my years with StreetAuthority, I've picked more triple-digit gainers than just about any other analyst.

A few years ago, for example, I recommended AuthenTec, a company beginning to dominate the market for biometric readers -- fingerprint scanners on personal electronic devices.

Not too long afterward, Apple agreed to buy the company.

Readers who followed my advice saw a total gain of 228%.

Another example: CalAmp (Nasdaq: CAMP), a maker of wireless communications hardware, rose 290% after I recommended it.

That's just the tip of the iceberg.

And I've done it by following three simple rules that any investor can follow.

Rule No. 1: Be realistic to the point of hyper-rationality I lost track years ago of how many clinical trials I've read about various drugs.

But do you know something? At the end of every report, I wanted to buy every one of the stocks behind those drugs. The studies are detailed and educational. They set up the problem and then offer a unique solution. The science, the explanation, the data and the financials are always very appealing.

But these early-stage drug-development companies are very risky. Heck, they are damn risky. No matter how good the initial trials look, there is no guarantee of approval, and a negative action by the Food and Drug Administration can cut a small drug company's stock price in half quicker than you can say Jack Robinson.

The other side of that coin, of course, is that the FDA (or one of its international counterparts) could rule in the drug's favor, in which case the little company's stock price chart resembles a space shuttle launch.

Now, the world's leading drug companies spend tens of BILLIONS a year looking for new drugs. But the FDA may only approve, say, 50 new drugs in a given year. But according to the Pharmaceutical Research and Manufacturers of America, only 1 in 10,000 of the compounds studied by drug companies becomes a product for sale on the pharmacy shelf.

How does an investor mitigate this risk? Research, research and more research.

I began my career as a journalist, and I learned there was no substitute for good old-fashioned shoe-leather reporting.

Aggressive growth investors must cut through all the hype. They must prosecute every claim. They must use facts and hard data to quantify a stock's likelihood to head skyward.

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Taxpayers who owed tax this year should check their withholding soon

Taxpayers who owed additional tax when they filed their federal return earlier this year should do a “paycheck checkup” as soon as possible. The IRS Withholding Calculator and Publication 505, Tax Withholding and Estimated Tax, can help these taxpayers do a checkup and avoid another possibly bigger tax bill next year.

Following the Tax Cuts and Jobs Act, which was passed last year, there are many changes to the tax law that could affect these taxpayers. Doing a checkup now will help them make sure their current tax withholding is in line with their 2018 tax situation.

Here are some things for these taxpayers to keep in mind:

These taxpayers may not have had enough taxes withheld from their pay throughout 2017, causing them to owe in 2018.

If they continue to have too little withheld from their paychecks the rest of this year, they could find themselves in the same situation again next year.

They might even end up with a larger tax bill when they file their 2018 return next year.

It’s important to remember that if a taxpayer underpays their tax too much, penalties and interest can apply.

The Withholding Calculator can help taxpayers apply the new law to their situation. The results from the calculator can help them make an informed decision about whether to change their withholding this year.

These taxpayers need to adjust their withholding as soon as possible for an even withholding amount throughout the rest of the year.

Waiting means there are fewer pay periods to withhold the necessary federal tax, which could have a bigger effect on each paycheck.

Taxpayers with more complex situations might find that using Publication 505 is a better option for figuring their withholding than using the Withholding Calculator. Publication 505 works better for employees who owe self-employment tax, the alternative minimum tax, or tax on unearned income from dependents. It can also help those who receive non-wage income such as dividends, capital gains, rents and royalties.

More information:

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Rocky Bivens

Rocky Bivens was live.

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2018 Tax Cuts and Jobs Act Changes to be Aware of

As you are  meeting with your clients this year you should make them aware of some of the 2018  changes that will or may affect their federal return for next year.

Here are some of the changes that go  into effect in 2018 from the Tax Cuts and Jobs Act:

 Standard  Deduction will be increased to $12,000 for single individuals and $24,000 for  married filing joint filers.

 Exemptions  are no longer applicable.

 Child  tax credit was increased to $2,000 for eligible children under 17 of which  $1,400 may be refundable.

 A  $500 nonrefundable credit will be available for eligible children that are 17,  18 or full time students ages 19 -24 and other eligible dependents.

 Itemized  deduction for taxes on Schedule A will be limited to $10,000.

 Job  expenses and miscellaneous itemized deductions subject to 2% AGI floor will no  longer be deductible on Schedule A. This includes employee business expenses  that were reported on Form 2106 such as vehicle expenses, travel expenses,  meals and entertainment, job education, etc.

 For  2018 only casualty losses that occur in a presidentially declared disaster zone  will be deductible as an itemized deduction on Schedule A.

 An  itemized deduction for mortgage interest will only be allowed for a taxpayer’s  principal home.

 An  itemized deduction will no longer be allowed for interest on a home equity  loan.

See the New Federal Tax Law Changes Included  in the Tax Cuts and Jobs Act page in the Tax Resource Center for a more complete listing of the tax provisions included in the Tax Cuts and  Jobs Act.