Even though this year’s tax season is over, that doesn’t mean your tax business is done. You may want to revisit the tax withholdings from your paycheck, pension check, or unemployment benefits check. The wrong amount of withholdings could mean a smaller tax refund next year or even worse, a big tax bill. There are several reasons why you may need to change your tax withholdings. Here’s what to know.
Taxpayers whose ITIN is expiring and who expect to have a filing requirement in 2020 must submit a renewal application. Others do not need to take any action. ITINs with the middle digits 83, 84, 85 or 86, 87 (For example: 9NN-83-NNNN) need to be renewed even if the taxpayer has used it in the last three years. The IRS will begin sending the CP48 Notice, You must renew your Individual Taxpayer Identification Number (ITIN) to file your U.S. tax return, in early summer to affected taxpayers. The notice explains the steps to take to renew the ITIN if it will be included on a U.S. tax return filed in 2020. Taxpayers who receive the notice after acting to renew their ITIN do not need to take further action unless another family member is affected.
It’s smart to look at ways you might minimize your tax liability. That’s especially true for 2019, the second year the sweeping new tax legislation (commonly known as the Tax Cuts and Jobs Act) generally applies. In light of the new income tax rates and significant changes to traditional deductions, it’s particularly important to speak with your tax advisor. Speak with them about some or all of the following ideas.
Federal Tax Refund Schedule
There is no set, precise schedule for when you would be receive a tax refund. Estimates of when yours would most likely come are generally based on two things: how you filed your taxes, and how you’re receiving your refund.
The ways you can file your tax return, be it by yourself or through an accountant, is either online (e-filing) or via paper mail. Similarly, the primary ways your refund can be sent to you is either via a direct deposit to your bank account or a check sent to you in the mail.
More often than not, if you’re getting a tax refund you’ll get it by 21 days after the IRS has accepted your tax returns. So after three weeks there’s a good chance you will have your refund. If it takes longer – say, a month or two – it may be because you mailed them instead of filing them online while also getting your refund in check form instead of a quicker direct deposit.
Should all the information on your tax forms be correct and up to date, your tax returns should be accepted not long after submitting them. Essentially, if you did everything right on a simple enough tax return, you’ll likely receive your refund in about three weeks after submitting it. So make sure to keep your tax records, as well as important forms like your 1040.
How to Track Your Federal Tax Refund
Three weeks isn’t a long time, but it can certainly feel that way. If you feel so inclined, there are ways to track your tax refund.
The IRS has both a desktop and mobile way to find the status of your tax refund. You are able to find out the status after 24 hours if you e-filed your tax return, and after four weeks if you did it by mail. Statuses on tax refunds are updated overnight, per the IRS website.
To do this, you will need to provide either your social security number or IRS Individual Taxpayer Identification Number (ITIN), your filing status, and the amount you will be receiving for your refund. The IRS’s app, IRS2Go, also lets you check your refund status among other capabilities.
In addition, it’s possible to call the IRS to ask about your tax refund status. However, they recommend using this only if it has been longer than three weeks since you e-filed or six weeks since you mailed your return, or if the IRS’s “Where’s the Refund?” program tells you to call instead of showing your status.
Why Might Your Refund Be Delayed?
There are several reasons your refund may end up delayed beyond the way you sent your return or receive the refund. Some of these reasons include:
Inaccurate information in your tax returns, including personal information or mathematical errors in taxes owed that requires fixing
Inaccurate direct deposit information
You claimed the Earned Income Tax Credit or the Additional Child Tax Credit. The Protecting Americans from Tax Hikes Act states that in this case the IRS cannot issue you a refund until mid-February at the earliest. If you filed your taxes in late January and claimed one of these tax credits, the IRS may be waiting until Feb. 15.
The IRS has suspicion of identity theft
Filing late in the tax season when the IRS is receiving the most amount of tax returns
You have a form of debt (such as child support) that allows the IRS to withhold your refund.
State Tax Refund
State tax refunds can differ somewhat from federal refunds, and if you want to know the status of this refund, you’ll have to check your state’s official website to see if they let you check the status.
Luckily, most states let you check the status, and many of those web pages even tell you how long it generally takes the state to process your refund. California, for example, lets you check your refund status while also claiming that e-filed returns generally take two weeks to process and paper filed returns take four weeks. In New Jersey, e-filed returns take around four weeks to be fully processed and validated while a paper filed one will take 12 weeks.
Like with the IRS’s website, to see the status of your refund on state websites you will need to provide your Social Security number and the amount you’re expecting in your refund.
When Can You Start Filing and What Is the Deadline?
The IRS recently announced that it would begin processing returns for this tax season on Monday Jan. 28, 2019.
As always, the majority of the country has until April 15 to submit their returns. The exceptions to this rule are the District of Columbia, Massachusetts and Maine. D.C. celebrates Emancipation Day on April 15, so April 16 is their deadline; Massachusetts and Maine celebrate Patriots’ Day on the 15th and have until April 17.
Will the Government Shutdown Delay Tax Refunds?
The IRS sent out the press release of a Jan. 28 start despite the government still being shut down, and many Americans are wondering how the shutdown will affect refunds.
The White House has stated that the IRS will be giving out tax refunds, even if the government remains shut down when Jan. 28 rolls around. If the shutdown is still ongoing, though, expect delays regardless. The IRS would be working with a significantly smaller workforce to handle its usual amount of tax returns.
Even without a shutdown, there has been concern about whether the IRS will be able to handle this workload in a timely manner. A September 2018 report from the Treasury Inspector General for Tax Administration claimed there was a higher risk of the upcoming tax season being delayed, due to the changes created by the passage of the Tax Cuts and Jobs Act of 2017.
The passage of the Tax Cuts and Jobs Act means some stark changes for tax filers and the deductions they can take.
One of the most notable changes is the increase in standard deductions for individuals and married households.
Tax filing season is only a couple months away. With the passage of President Donald Trump’s Tax Cuts and Jobs Act last year, filling out your tax forms might require a different strategy than what you’ve used in previous years. Here’s a breakdown of some of the more notable changes you need to consider for the 2018 tax filing season, including multiple deductions that are now kaput.
Increase to the Standard Deduction
Probably the most useful change for individuals and families is the increase in the standard deduction. The amount has almost doubled to $12,200 for individuals and $24,400 for families. These increases are supposed to increase the average household income by $4,000.
No More Personal Exemptions
Although increasing the standard deduction might be a good thing, you can no longer claim a personal exemption for yourself, your spouse or your dependents. This means you can no longer reduce your taxable income by $4,050 for each eligible member of your household.
State and Local Tax Caps
Known as SALT, the new tax law limits this tax deduction to $10,000, whereas previously it was unlimited. This could be a big drawback for people living in California, New York, South Carolina and other places where people pay high property taxes.
Reduced Mortgage Interest Deduction
Homeowners will only be able to deduct up to $750,000 worth of interest from qualified residence loans, whereas before it was up to $1 million. This could pose another problem for residents living in states with high home prices that require larger mortgages, like New York and California. Furthermore, you will also be unable to deduct the interest from home equity loans. Even currently existing home equity loans will not be grandfathered in, according to U.S. News.
No More Job Expenses Claims
You could previously claim unreimbursed job-related purchases so long as they were more than 2 percent of your adjustable gross income. Unfortunately for strapped employees, that deduction will be eliminated for 2018’s taxes.
No More Moving Expense Claims
Transients could’ve deducted moving expenses from their taxes provided they met certain criteria, but the new tax law eliminates this, with the exception of military service members moving to new duty stations.
No More Natural Disaster Deductions
It’s been an intense several years for residents dealing with natural disasters; the California wildfires are just the most recent example. Prior to the new tax law, victims of circumstance could deduct at least half of the expenses they incurred. However, under the new tax law, you must live in a “presidentially designated disaster area” to be eligible for the deduction.
Other Miscellaneous Deductions That Have Been Eliminated
The new tax law will also eliminate multiple deductions that might dent your tax refund, or increase your tax bill:
Tax preparation fees
Parking and transit reimbursement
Reduction of charitable donations if used to acquire college athletic tickets
Convenience fees for ATM use
Rread more about how Trump’s tax plan could save your business 20 percent.
Perhaps the biggest change is that the standard deduction nearly doubled as a result of the new tax law–it’s now $12,000 for singles, $24,000 for married filing jointly, and $18,000 for head of household. (In 2017, these amounts were $6,350, $12,700, and $9,350, respectively.)
Charitable contributions are only deductible as itemized deductions, and taxpayers must choose the larger of the standard deduction or the total of their (allowable) itemized deductions. When you also factor in some changes affecting (and in some cases eliminating) itemized deductions, it could be prove more difficult to amass total itemized deductions that exceed the new higher standard deduction.
Among the changes, the amount of the deduction allowed for state and local sales, income, and property taxes is capped at $10,000 for both single filers and married filing jointly ($5,000 for married filing separately). Also, certain itemized deductions such as theft and casualty losses were eliminated (with the exception of damage resulting from a federally declared disaster). Unreimbursed employee expenses an other miscellaneous expenses are also no longer allowed.
In addition, some changes were made to the mortgage interest deduction; generally mortgage interest is still deductible if the mortgage does not exceed $1 million for tax years prior to 2018 and $750,000 for tax years after 2018. Interest on home equity loans is no longer deductible unless the loan was used to improve the residence that secures the loan.
Medical expenses are still deductible if they are in excess of 7.5% of adjusted gross income; this “floor” is actually lower than it was before (10% of AGI).
And lastly, charitable contributions are still deductible, with slightly modified rules: Cash contributions to public charities are deductible up to 60% of a donor’s AGI for the tax year. Previously, this was capped at 50%.
How to Maximize Itemized Deductions
The tax deduction may not be the main impetus for most people give money to support causes they believe in; in fact, only around 30% of taxpayers have itemized their deductions in recent years. That said, one tax-planning strategy that might benefit charitably inclined investors is “clumping” or bunching deductions: choose certain years to maximize itemized deductions so they are in excess of the standard deduction. For example, in a year with medical costs exceeding 7.5% of AGI (the threshold for medical deductions), it could be beneficial from a tax perspective to be especially charitable, too.
One vehicle that could be especially beneficial in years with bunched deductions is donor-advised funds. Donor-advised funds allow donations of virtually any amount to the account and receive immediate tax benefits for doing so. But even though you’ve given up control of the assets and can’t reclaim them, you can take as long as you want to decide when, how much, and which charity gets paid from the donor-advised fund account.
In addition, donor-advised funds can be a good choice for investors looking to make an in-kind donation of appreciated securities or assets, because they are often better equipped to accept a wider variety of asset types than smaller charitable organizations. Donating appreciated securities or assets is another way to maximize donations: Donate appreciated real estate, stocks, mutual funds, etc. at fair market value and avoid the capital gain tax on appreciation, while still claiming the charitable deduction.
provision allowing many owners of sole proprietorships, partnerships, trusts and S corporations to
deduct 20 percent of their qualified business income.
The new deduction — referred to as the Section 199A deduction or the deduction for qualified
business income — was created by the Tax Cuts and Jobs Act. The deduction is available for tax
years beginning after Dec. 31, 2017. Eligible taxpayers can claim it for the first time on the 2018
federal income tax return they file next year.
The deduction is generally available to eligible taxpayers whose 2018 taxable incomes fall below
$315,000 for joint returns and $157,500 for other taxpayers. It’s generally equal to the lesser of 20
percent of their qualified business income plus 20 percent of their qualified real estate investment
trust dividends and qualified publicly traded partnership income or 20 percent of taxable income
minus net capital gains.
Deductions for taxpayers above the $157,500/$315,000 taxable income thresholds may be limited.
Those limitations are fully described in the proposed regulations.
Qualified business income includes domestic income from a trade or business. Employee wages,
capital gain, interest and dividend income are excluded.
The Calculator helps you identify your tax withholding to make sure you have the right amount of tax withheld from your paycheck at work.
Go to following link and calculate your withholding tax
Single or Married Filing Separately—$12,000.
Married Filing Jointly or Qualifying Widow(er)—$24,000.
Head of Household—$18,000.
Due to the increase in the standard deduction and reduced usage of itemized deductions, you may want to consider filing a new Form W-4.
Deduction for personal exemptions suspended. For 2018, you can’t claim a personal exemption deduction for yourself, your spouse, or your dependents.
Changes to itemized deductions. For 2018, the following changes have been made to itemized deductions that can be claimed on Schedule A.
Your itemized deductions are no longer limited if your adjusted gross income is over a certain amount.
You can deduct the part of your medical and dental expenses that is more than 7.5 percent of your adjusted gross income.
Your deduction of state and local income, sales, and property taxes is limited to a combined, total deduction of $10,000 ($5,000 if married filing separately).
You can no longer deduct job-related expenses or other miscellaneous itemized deductions that were subject to the 2 percent of AGI floor. You may still deduct certain other items on Schedule A, such as gambling losses.
For indebtedness incurred after December 15, 2017, the deduction for home mortgage interest is limited to interest on up to $750,000 of home acquisition indebtedness. This new limit doesn’t apply if you had a binding contract to close on a home after December 15, 2017, and closed on or before April 1, 2018, and the prior limit would apply.
You can no longer deduct interest on home equity indebtedness, which means indebtedness not incurred for the purpose of buying, building, or substantially improving the qualified residence secured by the indebtedness.
The limit on charitable contributions of cash has increased from 50 percent to 60 percent of your adjusted gross income.
Moving expenses no longer deductible. For 2018, you can no longer deduct your moving expenses unless you are a member of the Armed Forces on active duty.
Child tax credit and additional child tax credit. For 2018, the maximum credit increased to $2,000 per qualifying child. The maximum additional child tax credit increased to $1,400. In addition, the income threshold at which the credit begins to phase out is increased to $200,000 ($400,000 if married filing jointly).
Credit for other dependents. A new credit of up to $500 is available for each of your dependents who does not qualify for the child tax credit. In addition, the maximum income threshold at which the credit begins to phase out is increased to $200,000 ($400,000 if married filing jointly).
Social security number (SSN) required for child tax credit. Your child must have an SSN issued before the due date of your 2018 return (including extensions) to be claimed as a qualifying child for the child tax credit or additional child tax credit. If your dependent child has an ITIN, but not an SSN, issued before the due date of your 2018 return (including extensions), you may be able to claim the new credit for other dependents for that child.