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.
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
The benefits of e-filing include:
• You can electronically file 24 hours a day, 7 days a week.
• Your information remains secure and encrypted to ensure confidentiality.
• E-filed returns have fewer errors than paper returns.
• You can get your tax refund faster.
• You receive proof of filing and a notice when your return has been received and accepted.
The IRS issues acknowledgements online when e-filed returns are received and approved, so you’ll know within 48 hours that your return has been received. If the IRS detects any errors, your return is sent back to you (or your tax preparer) for corrections to be made.
A mailed return can take up to 6 weeks for your tax refund to arrive. Using the e-file process for your return gives you a faster refund and allows you the option to have it directly deposited into your bank account.
If you owe taxes, you can still file electronically. Know that you are required to make payment of tax due by the original April 15th deadline (which is actually April 18th this year). As long as your check is in the mail by the due date, your taxes will be considered “on time.” Other payment options include: the Electronic Federal Tax Payment System (EFTPS), Electronic Funds Withdrawal (EFW) from your bank account, money order, or using a credit card. Note that paying by credit card will cost a little extra because you’ll be charged a “convenience fee.”
1. New individual tax rates and brackets
For 2018 through 2025, the new law keeps seven tax brackets, but six are at lower rates. In 2026, the current-law rates and brackets would return. The temporary rate brackets under the new law are as follows.
Single Joint Head of household
10% tax bracket $0 – $9,525 $0 – $19,050 $0 – $13,600
Beginning of 12% bracket $9,526 $19,051 $13,601
Beginning of 22% bracket $38,701 $77,401 $51,801
Beginning of 24% bracket $82,501 $165,001 $82,501
Beginning of 32% bracket $157,501 $315,001 $157,501
Beginning of 35% bracket $200,001 $400,001 $200,001
Beginning of 37% bracket $500,001 $600,001 $500,001
Most folks will benefit from the new rates, but some who are currently in the 33% marginal tax bracket will find themselves in the 35% marginal bracket next year. This unfavorable change will mainly affect singles and heads of households with taxable income between $200,000 and $400,000. However, the new lower rates on income below $200,000 will offset some or all of the negative effect of being in the 35% marginal bracket. For comparisons, see the table at the bottom of this story for the 2017 rate brackets.
Year-end planning impact: Most individuals will benefit from year-end planning moves that push income into next year and pull deductions into this year.
2. No change in taxes on long-term capital gains and dividends
The new law retains the existing 0%, 15% and 20% tax rates on long-term capital gains and dividends. For 2018, the rate brackets are as follows.
Single Joint Head of household
0% tax bracket $0 – $38,599 $0 – $77,199 $0 – $51,699
Beginning of 15% bracket $38,600 $77,200 $51,700
Beginning of 20% bracket $425,800 $479,000 $452,400
Year-end planning impact: These brackets are almost the same as what they would have been under old law, with the only change being in the way the inflation adjustment for 2018 is calculated. Therefore, the traditional year-end tax planning strategies for securities held in taxable brokerage firm accounts still apply.
3. No mandatory FIFO stock basis rule
Starting next year, the Senate version of the tax reform bill would have forced you to use the first-in-first-out (FIFO) method to calculate the tax basis of shares that you sell from taxable accounts. If the price of the shares stair-stepped higher as you bought them, having to use the FIFO method would have meant that your taxable gain would be figured by treating the oldest and cheapest shares as being sold first. That would maximize your gain and maximize the resulting tax hit. Fortunately, this proposed change didn’t make the cut, so it’s business as usual.
Year-end planning impact: None. You need not sell shares before year-end just to avoid the now-discarded mandatory FIFO stock basis rule. Good!
4. Higher standard deductions, but no more personal and dependent exemption deductions
The new law almost doubles the standard deduction amounts, starting in 2018. However, personal and dependent exemption deductions, which would have been $4,150 each for 2018, are eliminated. Obviously, these changes will benefit some taxpayers and harm others. If you have many dependents, you may not be pleased. The 2018 standard deduction amounts are as follows.
• $12,000 for singles (up from $6,350 for 2017)
• $24,000 for joint-filing married couples (up from $12,700)
• $18,000 for heads of households (up from $9,350)
Additional standard deduction amounts for the elderly and blind are still allowed.
5. New limits on deductions for state and local taxes
Under old law, you could claim an itemized deduction for an unlimited amount of personal state and local income and property taxes. You could also choose to forego any deduction for state and local income taxes and instead deduct state and local general sales taxes.
Also see: The Trump tax calculator — will you pay more or less?
Starting next year, the new law limits your deduction for state and local income and property taxes to a combined total of $10,000 ($5,000 if you use married filing separate status). Foreign real property taxes can no longer be deducted. So no more property tax write-offs for your place in Cabo. However, you can still choose to deduct state and local sales taxes instead of state and local income taxes.
Year-end planning impact: Traditional year-end tax planning advice includes prepaying state and local taxes that would otherwise be due early next year. That way, you get a bigger deduction on this year’s return. However, the new law says you cannot get any tax-saving benefit from using this strategy to prepay state and local income taxes. Specifically, you cannot claim a 2017 deduction for state or local income taxes that are imposed for a tax year beginning after Dec. 31, 2017. How this rule could be enforced is a mystery. The good news: you can still prepay state and local property taxes before year-end and claim a 2017 deduction. That could be a really good idea in view of the new $10,000/$5,000 deduction limitation that takes effect next year. However, if you will be an alternative minimum tax (AMT) victim this year, deductions for state and local property taxes (prepaid or otherwise) aren’t allowed under the AMT rules. So prepaying could do you little or no tax-saving good.
6. New limits on home mortgage interest deductions
Effective next year, the new law reduces the maximum amount of mortgage debt to acquire a first or second residence for which you can claim itemized interest expense deductions from $1 million (or $500,000 if you use married filing separate status) to $750,000 (or $375,000 if you use married filing separate status). However, this change doesn’t affect home acquisition mortgages taken out under binding contracts in effect before Dec. 16, 2017 as long as the home purchase closes before April 1, 2018.
Also, the old-law $1 million/$500,000 limits continue to apply to home acquisition mortgages that were taken out under the old-law rules and are then refinanced after this year (as long as the refinanced loan principal doesn’t exceed the old loan balance at the time of the refinancing). Starting next year, the new law also eliminates the old-law rule that allowed interest deductions on up to $100,000 of home-equity loan balances.
7. No change in home sale gain exclusion rules
The new law preserves the valuable break that allows you to potentially exclude from federal income taxation up to $250,000 of gain from a qualified home sale, or $500,000 if you are a married joint-filer. The earlier House and Senate bills both included restrictions on this break, but none of the proposed changes made the cut. So it’s business as usual. Good!
8. Expanded medical expense deduction for 2017 and 2018
The House version of the tax reform bill would have killed the itemized deduction for medical expenses. Instead the new law preserves the deduction and actually expands it to cover medical expenses in excess of 7.5% of adjusted gross income (AGI) for 2017 and 2018 (the old-law deduction threshold for 2017 was 10% of AGI).
Year-end planning impact: Since it is now easier to exceed the percent-of-AGI deduction threshold, consider loading up on elective medical expenses, such as vision care and dental work, between now and year-end if that would net you a bigger 2017 deduction.
9. Education tax breaks preserved
The new law leaves existing education-related tax breaks in place.
Year-end planning impact: If your 2017 AGI allows you to qualify for the American Opportunity higher-education tax credit (worth up to $2,500 per qualifying undergraduate student) or the Lifetime Learning higher-education tax credit (worth up to $2,000 per tax return and covering most postsecondary education expenses including graduate school), consider prepaying tuition bills that are due in early 2018 if that would result in a bigger credit on this year’s Form 1040. Specifically, you can claim a 2017 credit for prepaying tuition for academic periods that begin in January through March of next year.
10. Other important changes and non-changes
• Starting next year, you will not be able to reverse the conversion of a traditional IRA into a Roth account. Under the old-law rules, you had until October 15 of the year after an ill-advised conversion to reverse it and avoid the conversion tax hit. At this point, it is not clear if this change would prevent you from reversing a 2017 conversion by 10/15/18 or if would only prevent you from reversing a conversion done in 2018 and beyond. So if you have a 2017 conversion that you already know you want to reverse, get it reversed before year-end to be on the safe side.
• Unfortunately, the new law retains the individual alternative minimum tax (AMT), but the AMT exemption deductions are significantly increased and phased out at much higher income level, starting next year. For many folks AMT exposure was caused by high itemized deductions for state and local income and property taxes and lots of personal and dependent exemption deductions. Those breaks were disallowed under the AMT rules. With the new limits in deductions for state and local taxes, the elimination of personal and dependent exemption deductions, and larger AMT exemption deductions, many previous victims of the AMT will find themselves off the hook, starting next year.
• Starting next year, the maximum child credit is increased to $2,000 per qualifying child, and up to $1,400 can be refundable (meaning you can collect it even if you don’t owe any federal income tax). In addition, a new $500 nonrefundable credit is allowed for qualified non-child dependents.
• Starting next year, deductions for moving expenses and most miscellaneous itemized expenses are eliminated.
• Starting next year, itemized deductions for personal casualty and theft losses are eliminated, except for personal casualty losses incurred in a federally-declared disaster.
• Starting in 2019, you will no longer be able to deduct alimony payments if they are required by a divorce agreement entered into after 12/31/18. Recipients of nondeductible payments won’t have to include them in taxable income.
• Tax breaks for adoption expenses are preserved.
• The tax credit for qualified plug-in electric vehicles is preserved. For details on this credit, see: You can get a $7,500 tax credit for a new electric vehicle.
• Starting next year, the unified federal gift and estate tax exemption will basically double — to about $11.2 million or $22.4 million for a married couple. Wow! That is indeed a tax break for the rich.
The last word
This isn’t really the last word. For the next few months, you will see many more words about other changes in the new law along with more details and analysis and tax planning strategies. My next column will cover the 10 most important changes for small-business owners. So please stay tuned.
Table: 2017 individual federal income tax brackets
Single Joint Head of household
0% tax bracket $0 – $9,325 $0 – $18,650 $0 – $13,350
Beginning of 15% bracket $9,326 $18,651 $13,351
Beginning of 25% bracket $37,951 $75,901 $50,801
Beginning of 28% bracket $91,901 $153,101 $131,201
Beginning of 33% bracket $191,651 $233,351 $212,501
Beginning of 35% bracket $416,701 $416,701 $416,701
Beginning of 39.6% bracket $418,401 $470,701 $444,551