Today is the deadline to file and pay your 2018 income taxes, but it’s not too early to start looking at 2019 tax planning and potential changes for 2020 and beyond. Both Congress and the IRS have changes in mind.

The House Ways and Means Committee recently passed the SECURE act that would make a number of changes to retirement plans. The changes that would affect most savers pertain to IRA accounts and the required withdrawals. Currently, retirees aged 70 ½ must start taking Required Minimum Distributions from their IRAs. The SECURE act would push the start age back to 72. It would also allow workers older than 70 ½ the ability to contribute to IRAs.

Increasing the RMD age would benefit taxpayers, but Congress plans to fund that by reducing the time that beneficiaries get to take withdrawals from an inherited IRA account. Currently, most beneficiaries can take RMDs based on the life expectancy table so that a younger beneficiary may only need to take 2% or so each year from the account and can let the rest compound tax deferred until their own retirement when they may want to take more. The SECURE act would mandate that the entire account be withdrawn and taxed within ten years versus the current “stretch” that could be taken over several decades.

The SECURE act still needs to be passed by the full Congress, but it received unanimous bipartisan support from the committee. The Senate has their own version, the RESA, so there will likely be alterations to the rules before they become law. With strong bipartisan support, the bills could be passed this year and take effect in 2020.

Meanwhile, the IRS is trying to improve the accuracy of payroll withholding. After the major tax law changes that took effect for 2018, the IRS changed the withholding tables to reflect lower taxes for most people. The older W-4s relied on claiming exemptions which are no longer part of the tax law. Unfortunately, their proposed newer version, while likely much more accurate, is also much more complex.

The draft form of the new W-4 required employees to fill out dividend and interest income, itemized deductions, tax credits and more. It wasn’t well received and the IRS is expected to come out with a revised version by the end of next month. If they get it right this time, it would go into effect for 2020.

Getting your withholding right can ensure that you avoid penalties and a big surprise tax bill for April 15th. The new form will likely be more complicated, but our advisors will be available to help you sort it out.