Almost a year ago, President Trump signed into law the Tax Cuts and Jobs Act, or the new tax reform law. Tax rates reduced for many people. However, the new law also changed the way taxable income is calculated. Accordingly, the amount of taxes that is withheld from your paycheck may change. The IRS developed a withholding calculator for people to use to make sure that the correct amount is being withheld from their paychecks to avoid paying after filing your return, or getting less of a refund than expected. You can find that IRS calculator here. The IRS also published a helpful guide for Individuals and Families, with step-by-step guide of how to use the withholding calculator, the differences between standard and itemized deductions, and a brief overview of the changes the new law enacted. You can find the IRS’ Tax Reform Basics guide for individuals and families here.
Additionally, for those who recently received money from a legal settlement, your settlement may have tax implications for you. While there are certain categories of lawsuits that are exempt and not claimed as taxable income (such as qualified personal injury cases, suits against employers), others may be. We advise all of our clients to speak with your accountant about any settlements that you received and how this may impact your tax return filing for 2019.