WASHINGTON -- If you haven't gotten yours yet, you should soon: a somewhat fatter paycheck, thanks to the tax reform bill passed by Congress and signed into law by President Donald Trump late last year.
But while you're headed out to spend or save those newfound gains -- admittedly modest, depending on your income -- you may want to give some thought to what your tax liability is going to look like next year at this time, when you'll be preparing to file your 2018 returns.
That's because whether you're a worker, retiree or small business owner (or even Dan Gilbert at Quicken Loans), you're going to want to know the ins and outs of what is a dizzying array of tax changes, which, despite promises to the contrary, fell far short of simplifying the tax code for everyone.
"Every tax professional should have reached out to their clients and talked to them about this by now," said Jeffrey Barringer, a partner at PricewaterhouseCoopers in Detroit. "If that hasn't happened, they (individuals and businesses) should be reaching out to their accountants."
If you are a regular employee or retiree, experts say you're probably fine, especially if you already use the standard deduction (which is getting bigger) or, if you itemize and your deductions are under $12,000 (for a single filer) or $24,000 for you and your spouse.
If you're tax situation is more complicated, though, you probably want to consult a tax professional, especially if you run your own business. And remember, if you need to make changes, you'll want to do it early in the year, rather than waiting until later when those changes may either cost you more or have a more limited effect.
Here are some aspects of the new tax law to keep in mind, with the year still young:
First, about those raises in your paycheck. They're based on Form W-4 you've previously filed with your employer, which spell out the number of dependents you have, whether you're claiming a child care credit and other information. New W-4s will eventually be issued but, in the meantime, the new withholding tables based on the old ones are generally seen as accurate. (New W-4s should eventually be posted at https://www.irs.gov/forms-pubs/about-form-w4 if you want to keep an eye out.)
You'll still want to review your paychecks to make sure the withholding seems generally in line with what it was before. In the next few weeks or months, the IRS should also create a new tax calculator for 2018 that will allow anyone to enter more specific information to determine whether your withholding is accurate for your personal circumstances. It's especially important to do that if you live in a household with more than one income; you or your spouse's employment situation has changed dramatically, or you have a more complicated tax structure, such as one where you itemize deductions. (If you want to run through some calculators now, the Washington-based Tax Policy Center's is at http://tpc-tax-calculator.urban.org; the Tax Foundation's is https://taxfoundation.org/2018-tax-reform-calculator/)
The big news, income tax-wise, is that the new law cuts the rates paid on most individual tax brackets by 3 to 4 percentage points for single filers with adjusted gross incomes (AGIs) of $9,525 to $157,500 a year and married couples filing jointly with AGIs of $19,050 to $315,000 a year. (Some income brackets above those amounts are getting cuts too, they're just smaller on a percentage-point basis.) The new withholding charts take that into account and that's why you're seeing (somewhat) bigger paychecks as your employer tries to balance what's withheld with what you'll likely owe. It's not an exact science, however, and your W-4 doesn't include all of your personal circumstances and itemized deductions, which is why it's best to double-check yourself.