Were you happy with your tax return results? Most people probably were happy with the results of tax law changes. The folks that were not pleased were those taxpayers who got an unexpected tax due or small refund surprise. Let’s review some of the tax surprises that do occur and how you can avoid them in the future.

If you are a retired senior and have a modest  income outside of your social security, very little of that social security is taxable. The surprise comes when a lump sum, for example $20,000, is taken out of a retirement account to pay for something out of the ordinary. The taxpayer assumes that they will pay additional taxes on just the $20,000 lump sum, but…that lump sum may force up to 85 percent of your social security to be taxable as well…a double whammy!

If a taxpayer is already paying tax on the maximum 85 percent of their social security income, additional income will not cause this surprise. Those seniors that have less than the maximum 85 percent of their gross social security income taxed will need to take this into account when they have a large amount of additional income during the year. Consulting with a tax advisor is recommended to plan for the federal tax impact of having additional income. Fortunately, New York State does not tax social security income.

Teenagers and college students with multiple seasonal or part time jobs may get a tax surprise because they have not had enough withheld in taxes from each of their jobs, even if they claim single status with zero exemptions on their W-4 and IT-2104. For dependents, if total earned income exceeds $3,100, NYS income tax will be owed. Federal taxes will be owed if earned income exceeds the $12,200 standard deduction. How do you fix this? Have a set amount withheld from your dependent’s  wages, rather than relying entirely on single zero status.

What about tax season surprises for working tax payers? If you pay a lot in state income taxes and local property taxes, your federal limitation is now just $10,000 for these deductions as part of itemized deductions. If you have high unreimbursed employee business expenses, these are no longer deductible for federal tax returns under the new tax law. Losing those deductions has hurt a number of taxpayers, but lower tax rates has reduced the impact.

Other surprises come when families have children reach age 17 and they are not yet in college generating education credits. The reduction in the child tax credit can be a big surprise. Just being aware of this is key here.  

Finally, keep track of your dependent children quickly filing their own tax returns online. A big surprise comes when you receive word that your e-filed tax return was rejected by the IRS because your child claimed themselves! This is a hassle to fix!