February 6, 2019

Ready for Tax Season?

How Is the Shutdown Effecting Work at the IRS During Tax Season?

IRS announced the filing season kicks off January 28, 2019, but how will returns be processed? The IRS recalled 46,000 workers to handle tax returns but won’t be paying them to ensure tax returns can be processed on time. Here are the services that will be occurring during the shutdown: · Returns will be accepted (E-File is encouraged to reduce the paper filings workers will need to process) · Refunds will be paid (although how fast remains to be seen) · No live person assistance is available by phone or appointment · No new audits while under shutdown · The IRS website will be operational About three-quarter of US taxpayers receive annual refunds, giving them an incentive to file their returns early. Many lower-income people count on refunds, which overall average $2,800. There had been growing concern that the shutdown would delay refunds because the money wouldn’t be available for them from Congress. But the administration said earlier this month customary shutdown policies will be reversed to make the money available to pay refunds on time. We expect Congress will be on board with this reversal. You can check your refund status here.

Tax Filing Season Dates You Should Know

January 28, 2019 – Tax season opens February 15,2019 – Refunds are eligible to be issued for taxpayers who claim the earned-income tax credit (EITC) or the additional child tax credit (ACTC) February 18, 2019 - IRS is CLOSED April 15, 2019 - Tax day, the last day to file your return or an extension to file. April 17, 2019 – Tax day if you live in Maine or Massachusetts as Patriot’s Day, April 15, 2019 is a legal holiday in these states. Additionally, Emancipation Day falls on April 16, 2019, a legal holiday in the District of Columbia, and as such, these states are considered to have timely filed by the 17th under Section 7503 of the US Tax Code.

New Tax Forms

The tax reform redesigned Form 1040. The new post-card Form 1040 replaces forms 1040A and 1040EZ. There are six schedules to report details outside of basic wages such as additional income and deductions, self-employed income, nonrefundable and refundable credits and foreign address. You can click here for further details.

Highlights of some tax law changes. Changes in Tax Rates For 2018, most tax rates have been reduced. Commencing 2018 the rates are 10%, 12%, 22%, 24%, 32%, 35% and 37%. The new tax rates applicable to a child’s unearned income of me than $2,550 are 24%, 35% and 37%, and the rates are no longer affected by the tax situation of the child’s parent. Changes to Standard Deduction The standard deduction is a dollar amount that reduces the amount of income on which you are taxed and varies according to your filing status. The tax reform nearly doubled standard deduction. The standard deduction rate for each filing status in the 2018 tax year is: Single $12,000 Married filing jointly $24,000 Married filing separately $12,000 Head of Household $18,000 The amounts are higher if you or your spouse are blind or over age 65. Changes to Itemized Deduction Many individuals who formerly itemized may now find it more beneficial to take the standard deduction. Certain deductions have been wither eliminated, reduced or have new dollar limits. For change details, click here. Changes to Benefits for Dependents You can’t claim a personal exemption deduction of yourself, you spouse, or your dependents. The child tax credit and additional child tax credit has been increased as well as the income thresholds at which the credit begins to phase-out. More families with children under 17 qualify for the larger credit. Your child must have a social security number to qualify for these credits. A new credit for other dependents is available for each qualifying dependent other children who can be claimed for the child tax credit. The qualifying dependent must be a U.S. citizen, U.S. national, or U.S. resident alien. You may be able to claim this credit for college students, children with ITIN’s or other older relatives in your household.

Repeal of deduction for alimony payments Alimony or separate maintenance payments are no longer deductible for any divorce or separation agreement executed after December 31, 2018. Any modification to payments occurring after December 31, 2018 for divorces or separation agreements filed before are not eligible for deduction. Furthermore, recipients of these payments for divorces or separation agreement occurring after December 31, 2019 no longer need to report these as income. Alternative Minimum Tax (AMT) exemption amount increased The AMT exemption amount is increased from $53,600 for single to $70,300 for single taxpayers and from $83,400 to$109,400 for married filing joint. This means far fewer taxpayers will pay the AMT. Retirement Plans You can no longer recharacterize a conversion from a traditional IRA, SEP, or SIMPLE to a Roth IRA. The tax reform also prohibits recharacterizing amounts rolled over to a Roth IRS form other retirement plans, such as 401(K) or 403(b) plans. You can still treat a regular contribution made to a Roth IRA or to a traditional IRA as having been made to the other type of IRA. For more information and other changes affecting retirement plans, click here.