Christmas is right around the corner, but some taxpayers may not be getting the gift of tax cuts promised in the Tax Cuts and Jobs Act that went into effect in 2018.
In fact, some taxpayers may owe tax next April, according to a July report from the Government Accountability Office (GAO). About one in every five (21 percent) taxpayers aren’t withdrawing enough tax from their paychecks because of the change in personal exemptions eliminated by the new law.
Business reporters may not land on their readers’ Christmas list for delivering the news, but you’ll be thanked for giving readers some wiggle room to come up with a plan before the end of the year:
Explain the new tax law
The new tax law went into effect January 1 of this year, but some of your readers may not have sat down to calculate how the changes might affect them and adjusted withholding on their W-2s. Previously, workers could have less tax if they itemized, but now most personal exemptions, including casualty losses, tax preparation and other fees, and home equity loan interest, have been eliminated.
The impact of the property tax deduction, now limited to $10,000, adds an extra punch to the problem. Develop a question-and-answer interview, conducted online or over the phone, showing just how much (or little) attention your readers have been paying (or not) to the new tax law.
Host a tax clinic for your readers
This income tax map of the U.S. by state from the Tax Foundation in Washington, D.C., will get the ball rolling. Ask readers to look at your state’s tax rate and compare their latest W-2, to check if they are having enough taxes withdrawn.
Then use your news organization’s social media channels to assemble an online panel of readers, along with a local tax expert or two who are Certified Public Accountants. Search this link to find a CPA who’s a personal finance expert on the website of the American Institute of Certified Public Accountants (AICPA). And be sure to diversify your search to find CPAs whose clients include low- and moderate-income workers to produce a balanced demographic picture.
Look into small businesses benefits
The new tax legislation may be a big plus for “pass-through” entities, who may be able to deduct 20% on qualified business income. If you don’t know what “pass-through” means—shame on you, you haven’t been paying attention to your small business owners, who represent 80 percent of all U.S. business owners. No federal taxes are on due on the profits of sole proprietorships, partnerships, LLCs and S corporations, but “pass-through” to owners, who pay taxes according to individual income tax rates.
Good sources to include: The federal government’s Small Business Administration, Brad Close, senior vice president for public policy at the National Federation of Independent Businesses, and Rob Hassett at Business Law Partners.