Tax Time Tips You Can Use

Why It Matters:

  • You can't be an expert on everything. It's easy to miss how changes in tax rules affect you.
  • Certain age milestones trigger tax changes, such as retirement account contribution and withdrawal amounts.
  • Tax reform changes may signal changes you can make to your own tax strategy.

Chase Squires tkc.profilePicture Written by: Chase Squires | Transamerica
March 21, 2018

5 Min readClock Icon

Another year, another tax season. You know the drill … or do you?

While only two things are certain, death and taxes, the “certainty” of taxes is a moving target. Changes to the tax laws and changes to your own situation make every tax season a good time to ask your tax professional about your strategy. Here are a few things you can discuss with the people who help you handle your finances:

An IRA contribution for the prior year

You know, it’s not too late to make a 2017 contribution to an individual retirement account (IRA), traditional or Roth. If you haven’t fully topped them off, you can “go back in time” and add to last year’s contribution, provided you stay within contribution limits and do it before the tax deadline, April 17, 2018. And if you turned 50 last year, you may not have thought to add the $1,000 catch-up contribution. Whether or not that contribution is deductible will depend on several factors, including income, the type of IRA, and the availability of a workplace retirement plan.

Contribute to an HSA for the prior year

Like the IRA, you can reach back and contribute to, or top off, a health savings account (HSA), provided you meet the guidelines, such as having a healthcare plan with a qualifying deductible. If you had automatic paycheck deductions into your HSA, you can look back and see if they added up to your maximum contribution or if there’s still some room to fill in. Again, age has its privileges. If you turned 55 last year, there’s another $1,000 catch-up opportunity.

Withdraw any excess contributions

Don’t forget to double-check your IRA contributions for the prior year. If you accidentally contributed too much, you can avoid a tax penalty by taking it out before tax day (and of course, you can’t claim a deduction — if you were counting on one — on any excess contribution. The IRS explains it in Publication 590).

Take first RMD (by April 1)

While the focus is on April 17, there’s another important date. If you turned 70½ last year, for some retirement accounts, you’ll often need to take your first required minimum distribution (RMD) by April 1. If you waited until 2018 to take that RMD for 2017, you’ll need to take another (for this year) by December 31. You’ll also have to stop contributing to a traditional IRA.

Make sure you didn’t forget something

It happens. You turn all your tax documents over to the tax pro, a pile of W-2s and 1099s and all the other stuff. And then a month later, a K-1 shows up, or you find a 1099 that got buried under a pile of junk mail. Make a mental checklist. Are you expecting K-1 partnership distribution forms, which may be distributed later than other forms? (And do you know what they are?) Is there another brokerage or bank account you forgot about? You can always file an amended return, but that’s a pain.

Increased limits

The contribution limit to most workplace retirement accounts like 401(k)s and 403(b)s goes up by $500 in 2018. If you were contributing the max to your workplace account in 2017, you may want to touch base with your company’s benefits administrators to boost the contribution a bit for 2018. It’s not a lot, but it’s something.

Remind adult children about taxes

If you have children who recently graduated from college and entered the working world last year, remember they may not be up to speed on filing their own taxes. Think back: Have you ever had “the talk” about taxes with your now adult children? (The author of this piece went two years after college without filing taxes because … taxes?).

File for an extension

If all else fails, don’t panic. If you’re going to miss the tax deadline, you can file an extension (and pay any estimated taxes).

Ask if strategies need adjustments

The tax reform bill signed into law this winter may merit some changes. Ask your tax professional if it’s time to review current strategies and make adjustments. The standard deduction for a married couple nearly doubled to $24,000; the amount of state and local taxes that can be deducted will be limited; and there were changes to estate taxes and how alimony and moving affect taxes.

Here it comes

The IRS estimates 155 million returns will be filed this year, with more than 70% getting tax refunds. Last year, the agency issued 112 million refunds, paying out $2,895 on average.

At a glance

Confused? The financial and legal professionals at Transamerica’s Advanced Markets Group have updated their Tax Facts at a Glance cheat sheet for 2018, with a lot of the tax numbers you may have questions about. It’s available now for download.

Things to Consider:

  • Like the start of a new year, tax time can be a good time to go over your financials with the professionals who help you.
  • Recent changes to the tax code may provide some opportunities to adjust your tax strategy.
  • Milestone birthdays - like turning 50, 55, and 70 ½ - come with changes to contribution limits and withdrawals from retirement accounts.

These materials are not intended to provide tax, accounting, legal advice, or investment recommendations. Neither Transamerica nor its agents or representatives may provide tax or legal advice. Anyone to whom this material is prompted, marketed, or recommended should consult with and rely on their own independent tax and legal advisors regarding their particular situation and the concepts presented herein.

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