What to Know
- Major tax overhaul passed by Congress in December is now in effect
- Employers using new federal tax withholding tables for paychecks
- California: $10,000 cap on state income tax and property tax deductions
With Tax Day 2018 come and gone, taxpayers should be getting ready for 2019 - or risk facing a costly surprise.
That's the advice from tax experts consulted by NBC Bay Area. The warning comes as the Tax Cuts and Jobs Act, passed by Congress in December, is now in effect.
When Washington first talked of tinkering with the tax code last fall, U.S. House Speaker Paul Ryan promised taxpayers could ditch the old 1040 form.
"We're making things so simple, that you can do your taxes on a form the size of a postcard," the Wisconsin Republican said in a news conference on November 2.
National Society of Accountants board member Ruth Godfrey was skeptical. "Yeah, right; it's got to be a huge postcard," she said.
Godfrey told NBC Bay Area there are "massive changes" in the federal tax code. The IRS says these changes require almost everyone's immediate attention.
"A lot of us are going to be affected by the amount of taxes we pay, based on this law," said IRS spokesman Raphael Tulino. "Consider some tax planning now."
The IRS says you should start with your paycheck. Ask your employer's payroll manager to make sure the amount you send to Uncle Sam each payday is enough to meet the new law's requirement.
"One of the things we want to make sure people are doing is taking a look at their withholding," Tulino said. "Employers are now using different withholding tables than they have in previous years."
You can also use the Tax Withholding Calculator provided on the IRS website.
Other big changes are triggering potentially costly questions for almost every family:
- The personal exemption is gone. Will that wipe out your refund?
- The standard deduction has nearly doubled. Should you still keep receipts and itemize?
- Property and state tax write-offs are newly capped, at $10,000. That includes California income tax and property taxes. Should you even bother?
"Based on the new law, it's going to have an effect in some way, shape, or form on all of us," Tulino said. "You'll want to take a look and see what withholdings are; see what you're paying as a taxpayer. That way, you will avoid a big surprise when you file next year."
If you're confused, Godfrey recommends an hour or two with an accountant.
"Even if your professional is paid by the hour, you're going to have a very good return on your investment there," she said.
There's also free tax help available from the IRS Local Taxpayer Advocate, with two offices serving the Bay Area: