Tax Considerations for the Working Individual Reviewing a 2018 Return – Family and Filing
With the end of the year in sight, it’s time to take a look at your 2019 tax strategy. One of the ways that you can prepare for the upcoming tax season is to look back at your 2018 return to see how your tax strategy worked out the last time you filed.
This article is first in a series on Tax Considerations for the Working Individual. Read of the series here:
- Tax Considerations for the Working Individual – Family and Filing Issues
- Tax Considerations for the Working Individual – Investment Income and Other Issues
- Tax Considerations for the Working Individual – Qualified Plan Issues
Here are some issues to keep in mind when reviewing your 2018 return:
What Deduction did You Claim?
If you claimed the standard deduction of $12,000 ($24,000 married), you may consider bunching charitable donations into one year. You may also decide to accelerate or prepay certain future expenses, like medical expenses or property tax. (Consult Form 1040, Line 9)
Are You Married?
Married couples have certain tax considerations that they should review yearly in order to make the most of their tax strategies. If any of the following apply:
- You and your spouse have a large disparity in incomes
- You have a number of large itemized deductions
- You or your spouse have income-based student loans
You may consider filing separately to offset your tax liability. Run the numbers for both married filing jointly and married filing separately to see how your estimated tax liability is impacted.
Have You Been Divorced or Lost Your Spouse?
If it’s been a personally traumatic year, one of the last things on your mind might be your tax status. But if you have lost a spouse or been through a divorce, you need to review your filing status to ensure you’re in the correct category. (Review the top of Form 1040)
Do You Have Dependents?
If you have children and make less than $200,000 ($400,000 for couples), don’t forget to take your child tax credit. (See Form 1040, Line 12)
- Are your children under age 13? Look to see whether you can claim additional deductions for child care. (Consult Form 1040, Line 12, and Schedule 3, Line 49)
- Do you have dependent children in college? Are you in college?
- If your income is below $58,000 ($116,000 married), check to see if you claimed the Lifetime Learning Credit in 2018. (Look at Schedule 3, Line 50)
- If your income is below $90,000 ($180,000 married), check to see if you have previously claimed the refundable portion of the American Opportunity Tax Credit (Form 1040, Lines 17c)
- Do you have non-child dependents that you can claim? In some cases, you may be able to claim a parent or another relative as a dependent and receive a Child and Dependent Care Tax Credit, as well as relevant medical expenses that you spent on that dependent.
Was There any AMT (Alternative Minimum Tax)?
If you had AMT in 2018, consider possible strategies to reduce it. These might include minimizing capital gains or maxing out retirement contributions to lower your income. You will also want to see whether you received a credit from paying AMT in 2017. (Consult forms 6251 and 8801)
Did You Have an Unexpected Outcome from Your Filing?
When you filed in 2018, did you need to pay more taxes than you expected? (Consult Form 1040, Lin 22) Or on the flip side, did you end up with a bigger return than you anticipated? (See Form 1040, Line 19) If you ended up with an unexpected outcome from your 2018 filing, you may want to look into whether this was an anomaly. Compare information from the past few years to see what might have changed.
Did You Withhold Enough in 2018?
If you failed to withhold enough taxes, you may have to pay a penalty. (See Form 1040, Line 23 and Form 2210). In the past, you would be responsible for 90% of your current tax liability, but the IRS changed this to 80% in 2018.
These are only some of the considerations that you need to make as you review your 2018 tax return and prepare for the upcoming tax season. To learn more about tax considerations for the working individual, stay tuned for information about reporting your investment income and other issues.
This article is first in a series on Tax Considerations for the Working Individual. Read of the series here:
- Tax Considerations for the Working Individual – Family and Filing Issues
- Tax Considerations for the Working Individual – Investment Income and Other Issues
- Tax Considerations for the Working Individual – Qualified Plan Issues
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.