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6 tips for navigating the new tax law

6 tips for navigating the new tax law

Click here to ask Chuck your money question

To learn Biblical answers to your financial questions, you can #AskChuck @AskCrown your questions by clicking here. Questions used may be lightly edited for length or clarity.

U.S. 1040 Individual Income Tax forms are seen in New York March 18, 2013. | (Photo: REUTERS/Shannon Stapleton)

Dear Chuck,

For several years now, my spouse and I have depended on our tax refund to make it through the year. A friend told me to not expect as much as last year and now I’m concerned about how that will affect our family. Can you offer any help for this year and tips to prepare for next year?

Taxed

Dear Taxed,

Great question, since roughly 60% of Americans expect to receive a refund based on their income tax filings.

The Tax Cuts and Jobs Act passed in December 2017 made changes that impact all of us this year. Many Americans do not know how those changes will affect them and may be pleasantly surprised or extremely disappointed.

The IRS released filing statistics for the week ending February 8th. The first two weeks of filing reveal that the number of returns is down and that refunds have dropped 8.7% with an average decrease of $186. These numbers are no reason to panic. We have another 6 weeks of statistics to analyze and some analysts predict higher returns.

Lower refunds are not indicative of more taxes paid, but the fact that tax savings showed up in paychecks throughout the year. This is the situation for those who did not adjust their withholdings after the new tax law changes.

The Facts

Business Insider reported that UBS analyzed how the new tax law would affect tax refunds. The findings revealed the following:

  • Singles may see a smaller refund
  • A $10,000 cap for deducting state and local taxes (SALT) will lower refunds for higher-income residents of states with higher taxes (like California and New York).
  • Married couples with two children may see an increase in refunds (especially those making less than $40,000 or between $125,000 and $400,000) due to the increase in size of the child tax credit and in the income threshold for claiming that credit.

TIPS

1. Plan and File Early

  • Minimize stress by organizing well to file sooner than later.
  • Prepare adequately to avoid penalties and costly mistakes.
  • Limit potential for tax identity theft.
  • Online filing with direct deposit grants faster refund.
  • The IRS may waive penalties if at least 85% of the tax liability has been paid.

2. Helpful Resources

3. Beware Of…

  • Depending on refunds as part of your budget
  • Scams: review the IRS ‘Dirty Dozen’ list
  • The fees of tax refund advances or loans: prepare early so you don’t need an advance
  • Preparers who promise big refunds: cheating may grant a larger refund, but back taxes and jail time aren’t worth it

4. Work Toward a Zero Refund

Remember, refunds are interest-free loans to the federal government. If you are in the habit of receiving large returns, adjust your withholding (and mindset) to use the monthly increase in pay towards giving, saving, and paying down debt. Focus on being a wise steward.

One who is faithful in a very little is also faithful in much, and one who is dishonest in a very little is also dishonest in much. If then you have not been faithful in the unrighteous wealth, who will entrust to you the true riches? (Luke 16:10-11 ESV)

5. Honor the Lord

Paying taxes is an opportunity to honor the Lord by living in obedience to His word. Consider some of the passages that should guide us:

He said to them, “Then render to Caesar the things that are Caesar's, and to God the things that are God's.”(Luke 20:25 ESV)

Let every person be subject to the governing authorities. For there is no authority except from God, and those that exist have been instituted by God. Therefore whoever resists the authorities resists what God has appointed, and those who resist will incur judgment. For rulers are not a terror to good conduct, but to bad. Would you have no fear of the one who is in authority? Then do what is good, and you will receive his approval, for he is God's servant for your good. But if you do wrong, be afraid, for he does not bear the sword in vain. For he is the servant of God, an avenger who carries out God's wrath on the wrongdoer. Therefore one must be in subjection, not only to avoid God's wrath but also for the sake of conscience. For because of this you also pay taxes, for the authorities are ministers of God, attending to this very thing. Pay to all what is owed to them: taxes to whom taxes are owed, revenue to whom revenue is owed, respect to whom respect is owed, honor to whom honor is owed. (Romans 13:1-7 ESV)

Remind them to be submissive to rulers and authorities, to be obedient, to be ready for every good work… (Titus 3:1a ESV)

Be subject for the Lord's sake to every human institution, whether it be to the emperor as supreme, or to governors as sent by him to punish those who do evil and to praise those who do good. For this is the will of God, that by doing good you should put to silence the ignorance of foolish people. Live as people who are free, not using your freedom as a cover-up for evil, but living as servants of God. Honor everyone. Love the brotherhood. Fear God. Honor the emperor. (1 Peter 2:13-16 ESV)

6. Pray

Our country is becoming more and more polarized. Let us commit to praying for our leaders at the local, state and federal levels. Pray for wisdom, discernment, and humility for responsible spending. Pray they will stop borrowing, work towards limiting government, and conduct themselves with diligence and dignity.

If my people who are called by my name humble themselves, and pray and seek my face and turn from their wicked ways, then I will hear from heaven and will forgive their sin and heal their land. (2 Chronicles 7:14 ESV)

First of all, then, I urge that supplications, prayers, intercessions, and thanksgivings be made for all people, for kings and all who are in high positions, that we may lead a peaceful and quiet life, godly and dignified in every way. (1 Timothy 2:1-2 ESV)

Chuck Bentley is CEO of Crown Financial Ministries, the largest Christian financial ministry in the world, founded by the late Larry Burkett. He is the host of a daily radio broadcast, My MoneyLife, featured on more than 1,000 Christian Music and Talk stations in the U.S., and author of his most recent book, Money Problems, Marriage Solutions. Be sure to follow Crown on Facebook.

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