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New income tax forms means checking these four items

As we wrote about last week, tax planning is a year-long process. With all of the changes to tax law brought on by Tax Cuts and Jobs Act this past spring, everyone should take a look at their current tax deductions and taxable accounts to ensure their financial goals are on track.

Another recent change from the Internal Revenue Service should also prompt a second look this summer. Last week, the IRS unveiled a new 1040 form for individual tax filers and those filing jointly as married spouses.

Though the new form is apparently "postcard-sized," experts caution that the shorter form does not necessarily mean simpler. Like with the older form, you will likely need just as many worksheets (called "schedules" in tax-speak) as before to complete your taxes accurately.

In preparation for the new form, it’s a good idea to revisit these four items:

  1. Your W-4 − The new law overhauled the tax withholding tables many employers use to calculate income tax deductions. Given the new format, it may be worth reviewing how much you’re withholding, if you haven’t already.
  2. Your other tax deductions  While the standard deduction rose with the new tax law (to about $12,000 for individuals and $24,000 for married spouses filing jointly), many itemized deductions were reduced or removed. That includes limits on the amount of state and local taxes you can claim, as well as the elimination of unreimbursed employee expenses and investment fees.
  3. Your investments  Speaking of investments, under the new tax law, you can no longer claim a deduction for custodial fees you pay out of investments like your IRAs, pensions or other accounts. So, you may need to get creative in how you wish to cover these fees, especially if your IRAs and other tax-deferred accounts are growing.
  4. Your charitable giving  With the limitations on what you can itemize in terms of tax deductions, you may want to consider "bunching" your charitable contributions. Bunching works by giving two years' worth of charitable donations in the same year. Doubling your donations may therefore exceed the threshold for charitable giving deductions so you can claim them on your taxes.

As always, it is important to discuss any major changes with your accountant or a skilled tax lawyer. Everyone's individual situation will vary according to their assets and individual goals. Nevertheless, reviewing these four items regularly ensures you won't be surprised come next spring.

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