Don’t Stop Thinking About Those Taxes Just Yet
If you’re like the majority of Americans you’re happy to finally put tax preparation behind you. The truth, however, is that it might not be time to forget about your taxes just yet.
Experts say it’s never too early to start preparing your taxes. Getting an early start can mean avoiding a host of issues sure to cause a few headaches for those unprepared filers.
Do you want to ensure filing your 2020 taxes goes smoothly? It makes sense to begin prepping your 2020 taxes now. Here are just a few tips to help you do so.
1. Should You Change Your Withholding?
First, you might want to consider adjusting your withholding in lieu of the new tax law taking effect. Your withholding is the amount you allow the government to withhold from every paycheck. This is also part of what determines how much of a tax burden you will have when you do file.
More allowances mean you may get a smaller tax refund while fewer allowances mean you may get more back in taxes. This is because the amount of taxes you paid throughout the year was less close to what you rightfully owe.
This withholding calculator can be useful for those interested in learning more about how much they should be withholding from their paychecks.
2. Study the New Tax Law
There have been many changes because of the new tax law. Many of the deductions you may have previously claimed have been done away with. Some new ones have also been created.
For example, there is a new 20% deduction for pass-through income. What does this mean? It means that some individuals may qualify for a 20% deduction available for some self-employed individuals and small-business owners. Typically, those with income below $157,000 qualify.
There are other changes to the law as well. Businesses are now able to write-off the cost of equipment. This means those eyeing big purchases might finally have the push they need.
There have also been changes to the estate tax. This means that assets valued up to $11.18 million can be traded among individuals without the prior, standard 40% tax.
3. Are You Required to Pay Estimated Taxes?
Self-employed individuals should do a little necessary planning as well to avoid a costly tax bill down the line. Self-employed individuals are required to pay estimated taxes quarterly. This means that they will need to estimate what they think their taxable income will be and plan to pay the appropriate taxes on it. The first payment was due 4/15/2019. The other payments will be due June 17, September 16, and January 15.
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