A lot of us look forward to doing our taxes with all the enthusiasm as a visit to the dentist. However, now things may be a bit easier and less painful. Take a quick look at a few tips as you prepare to file your return for this tax year and beyond. Tax laws and rules can be complex, so be sure to consult a tax professional before making significant tax moves.


Determine whether you need to file. You must file a federal income tax return if your income is above a certain level, which varies depending on your filing status, age and the type of income you receive. There are some instances when you may want to file a tax return even though you are not required to do so. The IRS’ Interactive Tax Assistant (ITA tool) can help you through the process of knowing whether or not you need to file.


Get your records together and keep them together. You are required to keep records, such as receipts, canceled checks, and other documents that support an item of income, a deduction, or a credit appearing on your tax return. Generally, you’ll need to keep these records for three years from the date you filed the return. Returns filed before the due date are treated as filed on the due date. There's no period of limitations to assess tax when you file a fraudulent return or when you don't file a return.


Consider life events that could affect your taxes. The following are just a few of the events or situations that may affect your taxes: marriage, separation/divorce, birth of a child, new career or job loss, disasters, disability, first-time home owner, moved, bankruptcy. See the IRS site for more information.


Don’t fall for scam calls and e-mails posing as the IRS. The most common scams are phone calls and emails from thieves who pretend to be from the IRS. Scammers use the IRS name, logo or a fake website to try and steal money from taxpayers. Identity theft can also happen with these scams. The IRS will NOT do the following:


  • Call a taxpayer if they owe tax without first sending a bill in the mail
  • Demand payment without allowing the taxpayer to question or appeal the amount owed
  • Require the taxpayer to pay their taxes a certain way (For example, demand taxpayers use a prepaid debit card)
  • Ask for credit or debit card numbers over the phone
  • Threaten to contact local police or similar agencies to arrest the taxpayer for non-payment of taxes
  • Threaten legal action such as a lawsuit. For those taxpayers who get a ‘phishing’ email, the IRS offers this advice: Don’t reply to the message, don’t give out your personal or financial information, forward the email to phishing@irs.gov, then delete it before opening any attachments or clicking on any links. More information on how to report phishing or phone scamsis available on IRS.gov.


Check out additional tax filing resources from the IRS. For additional help in preparing your tax return, the IRS offers the following tools, IRS Tax Map (to find forms and information by topic), and the following IRS YouTube videos:



In addition, consider some of the following important items for your long-term tax planning.


More money available for saving. Lower tax rates mean that more money can be directed toward retirement savings. You may want to increase your retirement saving now, since the lower rates are set to expire after 2025.


Saving to Roth accounts may be more attractive. Since deductions may not be as valuable under the new tax rates, it may be a good time to reevaluate the mix of retirement vehicles. For example, Roth-types of accounts may be more attractive for retirement saving; you don’t get the immediate tax deduction, but qualified distributions from Roth accounts won’t be taxed later. However, you can no longer recharacterize a conversion from a traditional IRA, SEP or SIMPLE to a Roth IRA. The new law also prohibits recharacterizing amounts rolled over to a Roth IRA from other retirement plans, such as 401(k) or 403(b) plans. In the year you make contributions, you can still make contributions to either a Roth or Traditional IRA, and before the due date for your tax return for that year, recharacterize the contribution to the other type of IRA.


Where you live becomes more important. High-income taxpayers who live in states like California, New York, and New Jersey are going to lose significant deductions because of the $10,000 cap on state and local taxes (SALT). However, Fewer taxpayers will now be subject to the alternative minimum tax (AMT) - the AMT exemption amount is increased to $70,300 ($109,400 if married filing jointly or qualifying widow(er); $54,700 if married filing separately). The income level at which the AMT exemption begins to phase out has increased to $500,000 or $1,000,000 if married filing jointly.


Opportunities to go into business for yourself. The new tax law is very complex regarding the taxation of non-persons, but some key, favorable, takeaways are that the new maximum corporate tax rate has been reduced to 21 percent, and major asset purchases are now immediately deductible. Non-corporate tax payers, such as sole proprietors, partners in partnerships, shareholders in S corporations, trusts and estates, can now basically deduct up to 20 percent of their business income.


Federal estate taxes become less of a concern, at least through 2025. Application of the federal estate and gift tax is narrowed by doubling the estate and gift tax exemption amount to about $11.2 million in 2018, with inflation adjustments in following years. However, 16 states and the District of Columbia still have some form of state estate tax, inheritance tax, or both. (States with an estate tax: WA, OR, MN, IL, NY, ME, MA, RI, CT, DE, DC. With inheritance tax: NE, IA, KY, PA. With both: NJ, MD). Unless made permanent, after the year 2025, the federal estate tax exemption level would fall back to $5.6 million per individual.



About the Blogger: Robert Steen is a Certified Financial Planner® professional and is the Advice Director for Retirement and Complex Planning at USAA.


This material is for informational purposes. Consider your own financial circumstances carefully before making a decision and consult with your tax, legal or estate planning professional.


The preceding discussion is not tax, legal or estate planning advice. Consult with your tax, legal or estate planning professional regarding your specific situation.


USAA means United Services Automobile Association and its affiliates. Financial advice provided by USAA Financial Advisors, Inc. (FAI), a registered broker-dealer, USAA Investment Management Company (IMCO), a registered broker-dealer and investment adviser, and for insurance, USAA Financial Planning Services Insurance Agency, Inc. (known as USAA Financial Insurance Agency in California, License # OE36312). Investment products and services offered by IMCO and FAI. Life insurance and annuities provided by USAA Life Insurance Co., San Antonio, TX, and in NY by USAA Life Insurance Co of New York, Highland falls, NY. Other life and health insurance from select companies offered through USAA Life General Agency, Inc. (known in CA (license #0782231) and in NY as USAA Health and Life Insurance Agency). Banking products offered by USAA Federal Savings Bank and USAA Savings Bank, both FDIC insured. Trust services provided by USAA Federal Savings Bank.


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