We are now in the last quarter of an evolutionary year where we are all dealing with the impact of tax law changes brought about by last year's "Tax Cuts and Jobs Act". There was initially significant confusion regarding implementation of the law resulting in even the updated income tax withholding tables not being revised until March of 2018. In addition, the changes to the rules regarding itemized deductions and especially the changes to the state and local tax deduction (SALT) has resulted in many taxpayers being under withheld for income tax purposes. However, one thing to keep in mind is that income tax withholding, including withholding on required minimum distributions (RMDs) and wages, are deemed to have been paid ratably throughout the year.

If you are still working and salaries and wages make up the bulk of your income, the payroll withholding tables have been adjusted to “attempt” to take into account the new law (but please verify with your tax professional). However, if you have income from multiple employers or other sources including investments, partnerships and self-employment, you need to estimate your income and pay estimated tax payments to ensure you meet the requirement that your income taxes are 90% paid in on a quarterly basis for the year or that one of the exceptions applies.

 If you find that you are underpaid for the year you can protect yourself for at least the last quarter of the year by ensuring you pay your fourth quarter estimated payment before the January 2019 deadline. Another strategy is to adjust your withholding between now and the end of the year (especially if you get a year-end bonus paid before year-end) to ensure that enough is withheld to have you safe for the year. Withholding, unlike quarterly tax payments, is deemed to have been paid ratably throughout the year and thus can help avoid penalties for previous quarters.

Last, if you are over 70 ½ and are required to take a required minimum distribution (RMD) in 2018, you can request tax withholding up to 90% of the distribution which will be deemed to have been paid throughout the year for tax penalty avoidance purposes as well.

These are all reasons that this year is a critical year to meet with your financial and tax advisory team well before year-end to estimate your tax liability and strategize how to minimize taxes in 2018 and beyond.

PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. This commentary is a matter of opinion and is for informational purposes only. It is not intended as investment advice and does not address or account for individual investor circumstances. Investment decisions should always be made based on the client's specific financial needs, goals and objectives, time horizon and risk tolerance. The statements contained herein are based solely upon the opinions of Telemus Capital, LLC. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice. Information was obtained from third party sources, which we believe to be reliable, but not guaranteed.

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