By the time you read this, summer school for colleges will begin. Yes, it’s time for college seniors to either make up those last classes, or adults, to continue their education. Myself, I will be spending the summer in the Business Department teaching what I believe will be the most important class that one could take this year: how to lower their tax burden in perpetuity.
As I am sure you learned from your 2018 tax preparation, yes, your tax refund was probably lower! Remember, the 2017 tax reform changes effected many new things: lower individual and business tax rates, higher tax deductions and credits for businesses, and less tax deductions and credits for individuals.
So, yes, in simple terms, you received a 2018 tax decrease and a lower refund.
Congrats, I think.
But let’s assume, as with 80 percent of Americans, that you want a higher refund. Well, let’s start with just one simple question?
Eighty-five percent of Americans forgot to readjust their W-4 at work to compensate for the tax cut that they received. Did you forget too? Or did you correct it? It’s 2019, and if you did not correct it your boat is getting more holes!
But it’s really not all that bad. After I spend the first three weeks scaring my students to death by using them as an example of this mess so they can really understand then we will spend the next seven weeks going over tax strategies to both lower their tax liability and receive a higher refund.
What one has to understand about the basic rules going forward as I stated above. Presuming that more individuals as opposed to business owners are reading this then remember you received a tax cut and a lower refund so let’s take care of the tax cut first
A new W-4 should be applied at work. Go to your most recent tax preparer who can assist you with the formula. Both of you should sit down to decide what you want to put back into the IRS kitty. After all, your tax cut was not bingo or free money but your money in the first place. So if you received, let’s say, an extra $20 a week in your pocket or over $1000 a year then, as a strategy, split the difference in half. Adjust your W-4 to take $10 back per week. Yes, you’ll have $520 less in your pocket during the year but it will be waiting for you as part of your refund during income tax preparation time the following year.
Deductions and credits have been either eliminated, reduced, or even expanded in the last 12 months.
For individuals: You want to discuss with your preparer, or more importantly, a financial advisor, about expansionary areas in, for example:
* Home Business
* Sole Proprietor
* Self Employed Retirement
* IRAs & 401ks
* Education
* Medical
* Charity
For individuals, there are many opportunities available to make up some of the things you could have lost over the course of the last 12 months.
I’m sure my students will enjoy the next several weeks until their final exam!
But more importantly, you should schedule a meeting with a tax advisor now. The old ways of using your tax refund as a forced savings plan for themselves have now been ruined now that the government has put their hands on your IRS tax refund cookie jar. Tax planning now could simply help take some of those “government fingers” off your tax refund cookies.
Professor Anthony Rivieccio, MBA PFA is the founder and CEO of The Financial Advisors Group, celebrating its 20th year as a fee-only financial planning firm specializing in solving one’s financial problems. Mr. Rivieccio, a recognized financial expert since 1986, has been featured by many national and local media including: Kiplinger’s Personal Finance, The New York Post, News 12 The Bronx, Bloomberg News Radio, BronxNet Television, the Norwood News, The West Side Manhattan Gazette, Labor Press Magazine, Financial Planning Magazine, WINS 1010 Radio, The Bronx News, thisisthebronx.com and The Bronx Chronicle. Mr. Rivieccio is also currently an Adjunct Professor of Business, Finance & Accounting for both, City University of New York & Monroe College, a Private University. For financial assistance, Anthony can be reached at (347) 575-5045. Feel free to visit their FACEBOOK Business page for past Financial Focus articles: www.facebook.com/