How to Anticipate Changes in Tax Law

Each year there are a number of changes in the tax law that affect most people who file Federal income tax returns. You can normally anticipate that changes will occur in the allowable exemption amounts, the standard deductions and the tax brackets. Other changes usually include the business standard mileage reimbursement rate and the maximum income subject to the social security tax.

Difficulty: Moderate

Instructions

1. Review IRS Pub 553 for the current year to see what changes were made that affect your taxes.

2. Check for completely new tax laws that may have a significant effect, either higher or lower taxes, in the amount you owe.

3. Estimate your total income for the year and the amount of your itemized deductions or standard deduction. Exclude pre-tax amounts such as health insurance contributions and retirement plan contributions from your total income.

4. Subtract the revised exemption amounts and revised standard deduction from your total taxable amount. If you are deducting business mileage as part of your itemized deductions, use the revised rates.

5. Calculate your estimated tax liability for the year using your estimated taxable income taking into account the various tax changes which affect you. You should use the revised tax brackets and rates to determine your estimated taxes.