THEY ADD UP
For most taxpayers, the immediate focus in the new year is probably on getting 2017 materials together ahead of the April rush. But it also makes sense to start preparing now for the 2018 tax year. These tips can help individuals and small-business owners lower their tax burden next year, avoid audits, and feel a little better about the whole process. The new tax law signed by President Donald Trump in December 2017, however, may also make this a good year to seek help from a professional when making tax decisions.
RE-EVALUATE RETIREMENT PLAN CONTRIBUTIONS
Taxpayers might want to increase their retirement contribution rate during 2018, helping grow a retirement fund while also lowering their tax bill. Investments in tax-advantaged accounts -- such as a traditional IRA, 401(k), and 403(b) -- grow on a tax-deferred basis and can be withdrawn without penalty starting at age 59½.
BUY HEALTH INSURANCE
While the new tax reform bill repeals the individual mandate, that change doesn't go into effect until 2019. So for the 2018 tax year, the penalty for not having health insurance remains the greater of 2.5 percent of household income (up to the annual national average premium for a bronze plan) or $695 per adult and $347.50 per child (up to $2,085 total).
REPORT LIFE-CHANGING EVENTS
PAY ESTIMATED TAXES ON TIME
MAINTAIN SEPARATE BUSINESS ACCOUNTS
RECORD OTHER BUSINESS EXPENSES
Make notes and keep documentation for everything. It's important to have proof of events and expenses if needed, and sometimes it can be hard to remember specifics. This is particularly important for events that occur early in the year, which may be long forgotten when it comes time to file 2018 returns next year.