Even amid the federal shutdown, here’s one thing you can count on: The start of tax season.
The IRS has said it will begin receiving your 2018 tax returns on Monday, Jan. 28. The revenue agency also said that it would pay refunds to eligible tax payers.
How smooth the process will actually be remains to be seen.
For instance, the agency has called for more than half of its staff — about 46,000 people — to come back to work.
The IRS has also warned that its service may suffer during the shutdown. Filers seeking live help on the phone won’t be able to get someone right now, but the agency has said it would add staff to answer calls.
Further, taxpayer assistance centers — locations where you can seek help from the IRS in person — are closed.
“It’s going to be an interesting filing season,” said certified financial planner Debbie J. Freeman, CPA and director of financial planning at Peak Financial Advisors in Denver. “Not just with the tax reform changes but also with the shutdown.”
Federal gridlock notwithstanding, accountants are recommending that you gather your data and prepare to file as early as you can.
“A lot of people hear that the IRS is taking returns on Jan. 28th, but they won’t file until April,” said Amy Wang, CPA and senior manager on the American Institute of CPAs’ tax policy and advocacy team.
“Always file as soon as possible if you have all of the information available,” she said.
Here’s what you’ll need to get your 2018 return to the taxman as quickly as you can.
This is the first tax year under the Tax Cuts and Jobs Act — an overhaul of the code that doubled the standard deduction: For 2018, it’s $12,000 for singles and $24,000 for married couples filing jointly.
The new tax law has also done away with personal and dependent exemptions. They used to be $4,050 for yourself, your spouse and each dependent.
The law limited itemized deductions, including a new $10,000 cap on state and local tax deductions.
Filers with children will also notice the child tax credit is now $2,000 per kid under age 17. Though the amount of the credit is up from $1,000 per child, this boost is only in effect from 2018 to 2025.
Finally, if you’re using a paper Form 1040, you’ll notice that it’s a little different as well. The form itself has been shrunken down so that it’s “postcard-sized,” and you’ll now have six new schedules to consult.
“Be prepared for the new look,” Freeman said. “Simplification equates to more paperwork.”
Now that the standard deduction has increased, fewer people are expected to itemize.
Nearly 30 percent of households itemized deductions in 2017, according to the Urban-Brookings Tax Policy Center.
That number is expected to drop to 10 percent in 2018.
Other changes include a $10,000 cap on state and local taxes, which will be especially painful for residents in high-tax states like New York and California.
You can also expect new limits on other itemized deductions, including the break for casualty losses, the mortgage interest deduction and miscellaneous itemized deductions.
Click here to find a list of breaks you may lose on your 2018 return.
Even if you think you’ll be taking the standard deduction, be sure to hold on to those statements and receipts.
“Your CPA will ask for all of your details to make the assessment as to whether you should take the standard deduction or the itemized deduction,” Wang said.
“Most taxpayers won’t know which one is better until they do the math and find out which is higher,” she said. “Sometimes it’s a difference of a few hundred dollars.”
Employees should watch the mailbox for a Form W-2 from their employers, detailing earnings, retirement plan contributions and taxes withheld.
You’ll get that by the end of January.
Meanwhile, businesses that hire independent contractors must give them a 1099-MISC by Jan. 31, which will have information on non-employee income.
Here are some key forms you’ll need to complete your return and when you can expect them.
Certain forms might not arrive until later this spring.
For instance, if you have a health savings account — a tax advantaged account you can tap tax-free for qualified medical costs — you’ll get a 1099-SA from the bank administering your account if you took a distribution last year.
That form will arrive by mid-February.
See below for other forms you’ll need in order to claim key credits and deductions.
“Understanding the tax credits is key to maximizing tax savings,” said Freeman. “Especially with the increased child tax credit, the child and dependent care credit — that’s where we focus time and energy.”
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Originally published at CNBC