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IRS Issues Tax Reform Info Ahead of 2019 Filing Season

November 3, 2018, 11:00 AM HST (Updated October 31, 2018, 10:15 AM)
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The Internal Revenue Service is advising taxpayers to familiarize themselves with the new tax law to ensure smooth processing of their 2018 return when they file next year.

Congress and the Trump Administration approved in December 2017 a major tax reform called the Tax Cuts and Jobs Act (TCJA) which affects both individuals and businesses. A new IRS publication, Tax Reform Basics for Individuals and Families, help taxpayers learn how they are affected by the new law. The publication clarifies changes for the 2018 federal tax return and provides information about:

  • Increasing the standard deduction;
  • Suspending personal exemptions;
  • Increasing the child tax credit;
  • Adding a new credit for other dependents; and
  • Limiting or discontinuing certain deductions.

Due to the reform, the IRS says tax returns may be different than years prior for some taxpayers. Some may even owe an unexpected tax bill when they file for their 2018 return. The IRS recommends taxpayers conduct a paycheck checkup to determine if they need to adjust their withholding or make estimated additional tax payments now.

Tax Filing Preparation Tips

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Gather documents
The IRS urges all taxpayers to file a complete and accurate tax return by making sure they have all the needed documents before they file their return, including their 2017 tax return. This includes year-end Forms W-2 from employers, Forms 1099 from banks and other payers, and Forms 1095-A from the marketplace for those claiming the premium tax credit. Confirm that each employer, bank or other payer has a current mailing address and check each form carefully for accuracy.

To avoid refund delays, taxpayers should avoid using incomplete records and instead wait to file until they have gathered all year-end income documentation. This will minimize the chances of having to file an amended return which take up to 16 weeks to process upon receipt by the IRS.

Taxpayers should keep a copy of any filed tax return and all supporting documents for a minimum of three years. Having a prior year return will aid the completion of a 2018 tax return next year. In addition, taxpayers using a software product for the first time may need the Adjusted Gross Income (AGI) amount from their 2017 return to properly e-file their 2018 return. Learn more about verifying identity and electronically signing a return at Validating Your Electronically Filed Tax Return.

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For a Faster Refund, Choose E-file
The IRS says using tax preparation software is the simplest way to file a complete and accurate tax return. Software guides taxpayers through the process and does all the math. The IRS is working with the tax community to incorporate the tax law changes and form updates. Nearly 90% of all returns are electronically filed. There are several e-file options:

  • IRS Free File;
  • Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs;
  • Commercial tax preparation software; or
  • Tax professional.

Use Direct Deposit
Combining direct deposit with electronic filing is the fastest way for a taxpayer to get their refund. With direct deposit, a refund goes directly into a taxpayer’s bank account. The same electronic transfer system is used to deposit nearly 98% of all Social Security and Veterans Affairs benefits. Nearly four out of five federal tax refunds are disbursed through direct deposit. Direct deposit also saves taxpayer dollars. It costs the nation’s taxpayers more than $1 for every paper refund check issued but only a dime for each direct deposit.

Renew expiring ITINs
Some people with an Individual Taxpayer Identification Number (ITIN) may need to renew it before the end of the year. Doing so promptly will avoid a refund delay and possible loss of key tax benefits.

Any ITIN not used on a federal tax return in the past three years will expire on Dec. 31, 2018. Similarly, any ITIN with middle digits 73, 74, 75, 76, 77, 81 or 82 will also expire at the end of the year. Anyone with an expiring ITIN who plans to file a return in 2019 will need to renew it using Form W-7.

Once a completed form is filed, it typically takes about seven weeks to receive an ITIN assignment letter from the IRS. But it can take longer—nine to 11 weeks—if an applicant waits until the peak of the filing season to submit this form or sends it from outside the country. Taxpayers should take action now to avoid delays.

Taxpayers who fail to renew an ITIN before filing a tax return next year could face a delayed refund and may be ineligible for certain tax credits. For more information, visit the ITIN information page.

Refunds Held for Those Claiming EITC or ACTC Until mid-February
By law, the IRS cannot issue refunds for people claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before mid-February. The law requires the IRS to hold the entire refund—even the portion not associated with EITC or ACTC. This law change, which took effect at the beginning of 2017, helps ensure that taxpayers receive the refund they’re due by giving the IRS more time to detect and prevent fraud.

As always, the IRS cautions taxpayers not to rely on getting a refund by a certain date, especially when making major purchases or paying bills. Some returns may require additional review for a variety of reasons and may take longer.

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