Are you ready for tax season? Because the IRS (almost) is ready for you! The 2018 income tax filing season opens on Monday, Jan. 29 and IRS expects more than 155 million individual income tax returns to be filed this year. Here are a few things to know as you prepare to file.
Tax season is two days longer this year! With April 15 falling on a Sunday and Emancipation Day recognized on Monday in Washington, DC, individual income tax returns are due on Tuesday, April 17, 2018.
Refunds will begin to flow in early February for most taxpayers, but those claiming refundable credits will have to wait a little longer. Since these credits are often miscalculated — at great cost to taxpayers — IRS is putting controls in place to make sure they are done right before cutting checks. Currently, they expect refunds associated with these credits, primarily the Earned Income Tax Credit and Additional Child Tax Credit, to be released starting Feb. 27. Remember that the Jan. 29 and Feb. 27 dates are set by IRS and not negotiable. Anyone who tells you they can beat these deadlines is not looking out for your best interests.
In addition to IRS doing more due diligence on returns with refundable credits, they are requiring tax professionals to do more due diligence as well. Be prepared to prove claims for refundable credits with credible information from third party sources. Since preparer penalties are severe and have been expanded to cover all refundable credits, expect your tax pro to ask more questions and require more documentation.
IRS is also trying to tamp down tax-related identity theft by putting more controls in place to secure your data. The good news is that this appears to be working; the bad news is that it makes working with IRS even more difficult. Be prepared to share your entire life story with them if you choose do deal with them directly.
Tax reform has been in the news and burning up social media over the last month, but most of those changes will affect 2018 returns filed next year and we will get to that in a future column. What you need to know now is that there are a number of new provisions related to hurricane Irma (and Harvey and Maria) that can cut your tax bills for 2016 and/or 2017. If you had unreimbursed losses, they are likely deductible, so start documenting them now. There are also new hurricane-related tax provisions related to retirement plan distributions, charitable contributions, refundable credits and other things.
If this all sounds complicated, that’s because it is, and that’s why you need a tax professional in your corner — we keep up with all this stuff so you don’t have to.
Jerry Gaddis is Founder & CEO of Tropical Tax Solutions, a full service firm headquartered in Key Largo offering Tax Consultation, Preparation and Representation services. Mr. Gaddis, a Dave Ramsey Endorsed Local Provider, is Enrolled to Practice Before the Internal Revenue Service and a Fellow in the National Tax Practice Institute. He earned degrees from the University of Florida and the Crummer Graduate School of Business at Rollins College in Winter Park. He’s been in the tax business since 2004 and you can reach him at www.TropicalTax.com .