Income taxes account for about 50% of all federal revenue — $1.688 trillion. About 33% of the federal revenue ($1.238 trillion) comes from payroll taxes. As the 2018 midterm elections wrap up, individual citizens and business owners alike will be carefully monitoring all the changes coming to the way taxes are handled.
This has already been a busy year for financial advisors and accountants, as the 2018 tax year will mark the first time that U.S. taxpayers will file under the Tax Cuts and Jobs Act.
According to Tax Foundation, the Tax Cuts and Jobs Act has made several significant changes to the individual income tax, including reforms to itemized deductions and the alternative minimum tax, lower marginal tax rates across brackets, and an expanded standard deduction and child tax credit.
These tax chances — in theory — simply the individual income tax for millions of Americans, as 28.5 million filers should be better off taking the new standard deduction with its expansions, rather than itemizing deductions and reducing compliance costs.
According to CNBC, the new legislation doubled the standard deduction to $12,000 for single citizens and $24,000 for married joint filers.
“For the majority of people, the changes are around standard and itemized deductions — not very many will itemize anymore,” said Dave Stolz, CPA and member of the American Institute of CPAs personal financial specialist credential committee.
It’s recommended for everyone to pay attention to their paychecks even more than usual during the 2018 season as these new laws are implemented. The new tax law also resulted in the IRS updating withholding tables. These tables serve as guidelines for employers to ensure that an individual is having the correct amount of income tax withheld from pay. Make sure you don’t fail to withhold sufficiently because you’ll have to pay for taxes owed.
Currently, it’s said that 21% of taxpayers — 30 million Americans — aren’t withholding enough taxes from their organizations.