Early results from tax planner for 18

[Abby Normal]

Singles with standard deduction (both young and old) are getting small tax cuts. Married, sold middle class, with multiple kids and modest itemized (16k) are seeing the base tax go up by 750 - 1k (due to losing 4 or 5 personal exemptions), but offset by 2k child tax credit... until the kids start hitting 17. And no one has hit the 10k SALT limit or had 2% items. Those come later.

Biggest concern, standard deduction folks are seeing withholdings go down by more than their actual tax decrease. Example, older married couple, no kids, tax decrease was 800 but withholding decrease was 1,300. Not bad if taxpayer normally gets big refund, but this couple gets a small refund.

[TAXMAN]

I am getting about the same results. One of mine 72 yrs young got a 652$ increase. I penciled it to be sure. You don't want to hear her comment.

[SaraEA]

I too am seeing client projections all over the place.  Some with incomes well under $100k seeing increases, others with higher incomes getting big breaks.  I am uncomfortable being entirely dependent on the software to do the projections because there are so many moving parts to this tax law that I don't have any internal sense of what the result should be.  The software is brand new and likely contains errors that we aren't aware of yet, so I'm telling clients this is less than an educated guess.

I agree with Abby that the biggest concern is that withholdings are going down.  I had a couple today whose projected 2018 liability went down by $2800.  They both had reduced withholding in their latest paychecks so I did the math and discovered they will have $4500 LESS withheld=big tax bill next year at this time.  The problem is that everyone is going to be happy seeing their paychecks go up and realize they were duped when they file in 2019 (after the Nov elections of course).  We really shouldn't do projections until people give us paystubs after their employers instituted the new withholding tables (was supposed to be mid-Feb deadline but now extended to end of Feb).  The problem, of course, is that we are up to our scalps in returns at that time and won't be able to spend the time.

I read an article in Accounting Today that the increased child tax credit doesn't cover the loss of exemptions for taxpayers above the 15% bracket.  For those in the 25% bracket, for example, the exemption was worth $4050 X .25 = $1013 + 1000 CTC = $2013, or about the same as the new CTC with no exemptions.  For those in the 28% bracket, they lose money.  This higher exemption isn't what it was cracked up to be.

[NECPA in NEBRASKA]

I already had a call from a client that had her net pay go up $100 and she is paid bi-weekly. She would owe so much money when she files. I told her to file a new W-4 and tried to figure out how much additional tax should be taken out from each paycheck. This just frosts me! I already have trouble getting my work done in a timely manner, so trying to help everyone with these extra computations and being ragged at makes me want to send Rita to Washington to hug all of them. 

I know that my small business owners will probably end up happier, but a lot of my elderly clients and middle class families are going to be big losers. 

 

[FDNY]

I'm seeing the same, many clients getting too much more take home than is realistic, I've advised to update W4.   There is going to be a lot of unhappy people next year.

[ILLMAS]

Q: is everyone adjusting federal withholding for 2018?  I did a projection for a client using 2017 wages and withholdings and things look good, but I know the withholding should be less.

[NECPA in NEBRASKA]

I don't even know how to begin to adjust the withholding. I am just guessing at how much they will cut. I am not going to do w4s for everyone right now.

 

[Gail in Virginia]

ProSeries will do a tax plan for federal but not for state.  On clients that itemize normally, but will not with the new, improved standard deduction on the federal, the federal taxes might go up or down by less than $1,000 either way. However, in Virginia if you don't itemize federal you can't itemize state, so changing to the same old standard deduction on Virginia might result in several dollars of tax.  I don't have time for this now - but this is the only time I see most of these people!

[Abby Normal]

3 minutes ago, Gail in Virginia said:

in Virginia if you don't itemize federal you can't itemize state

Same in MD, unless they change the law... which they've indicated they might. I'll have to remember to remind those going from itemized to standard for federal that their state taxes are going up, pending any changes the states might make.

[GLJEANNE]

I haven't gotten enough wage earners in yet, but based on my business clients, the new withholding tables seem way off.  I've been telling them to warn their employees that they need to look carefully at it when they get their taxes done.

No way yet to help anyone plan for state, our legislature isn't even in session yet, so no idea how/if they'll conform.  Based on experience, we may not know until late March. 

[TAXMAN]

On ‎02‎/‎12‎/‎2018 at 9:10 AM, Gail in Virginia said:

ProSeries will do a tax plan for federal but not for state.  On clients that itemize normally, but will not with the new, improved standard deduction on the federal, the federal taxes might go up or down by less than $1,000 either way. However, in Virginia if you don't itemize federal you can't itemize state, so changing to the same old standard deduction on Virginia might result in several dollars of tax.  I don't have time for this now - but this is the only time I see most of these people!

Gail I tried a couple of returns where the A was lost, tax up 20 to 300. VA will be happy, TP will be sad. One I tried where TP turns 65 during 2018. Great for tax liability issues.