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Tax season confusion: What you need to know before you file this year

Samantha Bomkamp, Chicago Tribune on

Published in Home and Consumer News

For small-business owners, preparation for the changes will be more complicated, and will depend on some information that has yet to be clearly defined. For example, the Treasury Department has said that some service companies, like law offices and accounting firms, won't be able to take advantage of sizable tax-rate reductions for so-called pass-through businesses like limited liability companies, where individual owners pay taxes for the business on their personal tax returns. But the definition of a service business hasn't been clearly spelled out -- something that's expected to come later this year.

"Unfortunately, there are a lot of question marks as far as what qualifies and how to qualify for it," Goldberg said. "There are a lot of folks who are going to try to shoehorn themselves into that category."

YOU'LL (PROBABLY) GET A BIGGER PAYCHECK.

Here's a bright spot coming soon: Most Americans -- about 90 percent -- will see a little bump in their paychecks starting next month, according to the U.S. Treasury. And more money is always good, right? Maybe not for long.

The salary increases will be the result of adjustments in the IRS withholding table, which is what employers use to determine how much to take out of employees' paychecks. Many employers will adjust their employees' withholding automatically under the new law, experts say. But Manuel Pravia, a principal at the Florida accounting firm MBAF, recommends that taxpayers ensure their withholding is correct so they don't get a shock come tax time next year. If you are put into a withholding category that leaves you with extra money in your paycheck, it could mean that you'll wind up owing the IRS. The withholding table for 2018 is not yet available, but will be posted on irs.gov.

"Everybody has to be mindful -- it's a change, and somebody's going to be caught unaware," Pravia said. "If you get less withheld for the next 11 months, you may have an unpleasant surprise in 2019. That's the No. 1 thing that's going to impact a big portion of the population."

REFUNDS WILL BE SLOWER.

Expect a refund this year? You'll need an extra dose of patience. All the changes in tax law -- combined with a short-staffed Internal Revenue Service -- have the government running a bit slower this year, Marzahl said. That may delay many federal refunds filed via standard mail this year.

The delay won't rise past a minor annoyance for most Americans, but it could be a significant burden for low-wage earners who count on federal refunds to cover rent and other critical bills, Marzahl said.

Electronic filers should not be affected by the delay.

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