March 15th marked the due date for corporate tax returns, and it also marks exactly one month before personal tax returns which are due on April 15th. By now you should have all your 1099s, W2s, and tax documents collected and ready to go.
This year the IRS started processing taxes in January on the first full workday for IRS workers after a temporary measure halted the government shutdown. This tax season will be the first full one after the landmark tax reform law passed in late 2017.
According to the Washington Post, The IRS told lawmakers it would return from the government shutdown buried in millions of unanswered taxpayer letters, weeks behind schedule on training for workers and in need of hiring thousands of new employees for this tax filing season. In addition, The National Taxpayer Advocate, a government watchdog group that oversees the tax collector, has stated that it is likely to take at least a year for the IRS to return to normal operations.
But aside from the inner workings of the collection agency for your taxes, how does this affect you personally? Well, for one thing, because of the shutdown, refunds may be delayed, which isn’t the best news in the world.
Most people have a number in mind when tax season rolls around. How much they will receive in a refund, or how much they’re likely to pay. The new tax laws may result in some differences from your expectations this year.
In some ways, that’s a good thing, and in other ways, not so much. Parents - pay attention. For example: If you took advantage of the child tax credit in 2017, you were able to claim a $1,000 credit on your income tax return for each child under 17 who qualified. For 2018, that deduction has doubled to $2,000 per qualifying child. The child tax credit was nonrefundable before the TCJA (The Tax Cuts and Jobs Act). Now, the refundable portion is equal to 15% of your earned income over $2,500, up to $1,400.
If your child does not qualify for the CTC because they are over 17, they may still be eligible for a $500 credit under the new TCJA. The credit also applies to dependents who are elderly or disabled.
529 Plans saw some changes too. College savings are important. School is expensive. We all know this. But nowadays, even putting your kids through kindergarten can get expensive! With the old tax laws, your 529 could only be used at eligible colleges and universities. Under the new TCJA, you can use your plan to cover up to $10,000 per year of qualifying expenses for any school and any grade from kindergarten through 12th as well. That includes public, private, and religious institutions.
Among other changes to the tax laws are the changes to the personal exemption and standard deduction, restrictions to homeowner deductions, changes to alimony deductions, and changes to the kiddie tax. Be sure to consult with a tax professional if you have any questions.
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