Articles Posted in Tax

Most people don’t start thinking about their taxes until April. Many businesses have to deal with them year-round, but even then, their tax burden may not get as much attention as it probably needs. With the start of the new year, now is the time to start preparing your taxes. There are several reasons to do this, six of which we’ll discuss here.

1. Get Refunds Sooner

One of the most attractive benefits of filing taxes promptly is that you get your refund sooner. If you overpaid over the course of the last year, you’ll be due a refund, and that extra cash can be very helpful if business has slowed down after the holiday season. If you make estimated payments throughout the year, that extra windfall can be put toward this year’s taxes, diminishing your overall financial burden.

If you have received workers’ compensation due to a workplace injury, the question of taxes may come up sooner or later. You may wonder if those benefits are taxable. If you are receiving a wage differential or disability benefits, will you have to report those on your return?

The simple answer is these benefits are not taxable. You can receive benefits through workers’ compensation without fear of it impacting your taxes—at least in most scenarios. There is one exception to this rule, and it involves Social Security.

Workers’ Compensation and Social Security

While 2019 may be a few months off, it is rapidly approaching, and it’s never too early to begin planning for the next tax year. The IRS tax code is constantly evolving, as is your own financial situation, so making these plans early will help you avoid unpleasant surprises later on. Among the various tactics one can use to prepare for the next tax year are the following.

Review Your 2018 Return

First, you’ll want to review your tax return for this year. This will give you some insight into where you might have been off on the previous year’s tax planning and how you might improve this year. If you ended up owing taxes, try to see why and make plans now to minimize those issues.

Tax season is coming up, and you may be due a refund. In the simplest of scenarios, this is handled in the course of filing your annual tax return, but in some cases, there may be an error that means you still paid more than you technically owed. Businesses and those with more complex financial profiles may find themselves overpaying due to certain oversights or situations.

Common Errors

Errors on taxes are common, and the IRS generally does a decent job of double checking your returns and refunding overpayments. If you made math errors on your return or when calculating certain taxes, or if you forgot to take certain obvious exemptions, you will usually be refunded the amount overpaid with no effort on your part.

A major part of the estate planning process is making sure you shield your estate from taxes as much as possible. In many cases, this isn’t too much of a problem, but you do need to plan everything carefully. Oversights can lead to excess tax exposure, the result of which would be a significant reduction in what you pass on to your heirs.

One of the questions you’ll have to deal with is whether a tax return needs to be filed for your estate. In many cases, it may not be strictly necessary, but it’s often a good idea to do so anyway.

Technical Requirements for Filing an Estate Tax Return

April 15th has come and gone, and if you haven’t filed your taxes, there will likely be penalties assessed. These can become significant, especially if you’re also behind on tax payments. There are a number of ways to deal with this situation, however, and while it’s best to avoid filing late in the first place, the IRS is typically willing to work with those who face difficulty making the deadline.

Late Filing Vs. Late Payments

Before going into what happens if you’re late filing, it’s important to know that filing late is not the same a paying late. You can file on time and be late paying the taxes you owe, or vice versa.

Earlier this November, a plan was introduced in the U.S. Senate that can significantly impact the way taxes are handled throughout the nation, and particularly in Illinois. Among the changes it proposes are elimination of federal deductions for state and local taxes.

The SALT Deduction

State and local taxes, also known simply as SALT, have until now been deductible from federal taxes. In other words, you can take the total amount you pay in SALT and subtract that from your taxable income on your federal tax return as an itemized deduction. This helps relieve the tax burden on all states, but it is especially beneficial for Illinois residents who have among the highest property and income tax rates in the nation.

The recently passed school funding bill is going to increase property taxes in Cook County, most significantly in Chicago. Within the city, the amounts homeowners owe on their property taxes each year could increase by as much as 10%. The increases are smaller in the suburbs around the city, ranging from 3.9% to 6.5%, but will still exact hundreds in taxes from their owners every year.

Businesses aren’t faring much better, with city commercial property going up by over 9%. While a few areas will see taxes on commercial properties go down slightly, the overall result is higher tax obligations throughout the county.

Renters may not escape this either since the extra taxes paid by their landlords will almost inevitably be passed on to them in the form of higher rent.