The federal tax overhaul put in place by Republicans has produced an unusual show of bipartisanship now that tax season is here: We are a nation united in befuddlement.
One bit of confusion to dispel quickly: The changes don’t affect taxpayers for the 2017 filing season, which officially begins Monday when the Internal Revenue Service accepts its first returns. That’s news to about 41 percent of the 2,000 Americans recently surveyed by tax prep chain Jackson Hewitt—they thought the tax law President Donald Trump signed on Dec. 22 would affect their filings this season (among millennials, it was 50 percent).
It should come as no surprise then that tax preparers and financial advisers are girding for a barrage of questions from clients about what they should do right now. As these experts scramble to educate themselves, the opaque nature of the new law and its unanswered questions (it was rushed through Congress so fast some changes were scribbled on the margins) have even left them confused.
”I attended my second tax update for CPAs today where the instructor completely contradicted what we heard last week at a similar session,” said Evan Beach of Campbell Wealth Management in Alexandria, Virginia. Nevertheless, there is some consensus as to what you can do now. Below are some early thoughts from wealth managers on strategies taxpayers can start thinking about to avoid unpleasant surprises a year from now.
1. Preview your 2018 taxes
Advisers suggest having an accountant run mock 2018 returns after this year’s forms are finished. TurboTax’s TaxCaster tool was just updated to be able to forecast a 2018 tax refund based on the new law. Users enter their basic 2017 tax information, and it will spit out a 2017 estimated refund and a forecast for 2018 side by side, according to the company.
H&R Block said its preparers will get a “pretty detailed” tool in the first week of February to allow them to go over a finished 2017 return, line by line, and preview the new tax law’s impact on next year’s return. TaxAct expects its calculator to be updated by mid-February such that it can preview next year’s taxes.
Running those future numbers can flag potential issues. That said, state revenue departments and the Internal Revenue Service have had little time to process the changes, so much remains in flux. “The IRS and states haven’t decided how some provisions of the new tax law will be calculated yet,” said Jagjit Chawla, general manager of Credit Karma Tax. “For example, they only recently shared guidance with tax preparers about the current 2017 tax season. The IRS and states will share their 2018 guidance later this summer.”