Tax Returns?

LOL - someone on BBG had a similar idea (article from 7 am this morning):
https://www.bloomberg.com/opinion/a...efunds-will-put-a-damper-on-consumer-spending

 

I owe this year. But I also owe every other year.

 

Your Money Adviser

Still Haven’t Filed Your Taxes? Here, Last-Minute Advice

If you haven’t filed your tax return yet, time is getting short. But you aren’t alone in procrastinating.

The number of individual tax returns received by March 29 was down more than 1 percent from the same time last year, the Internal Revenue Service reported, and the size of the average refund declined by 0.7 percent, to $2,873.

The decline may be because taxpayers are still trying to understand the impact of the Tax Cuts and Jobs Act of 2017, which made sweeping changes in tax forms, brackets, rates and deductions.

“This is the most complicated tax season ever,” said Ross A. Riskin, a certified public accountant and an assistant professor of taxation with the American College of Financial Services.

The I.R.S. is estimating that it will receive more than 14.6 million extension requests this year, or nearly one in 10 filers. That would be the largest number of requests ever received in a year, an I.R.S. spokesman, Eric Smith, said.

Many filers paid less federal income tax over all in 2018 because of the new law, Mr. Riskin said. But because of revisions to tax withholding tables, some people had less tax withheld from their paychecks over the course of last year. That meant they received the benefit incrementally, in slightly higher paychecks, rather than in a juicy, lump-sum refund.

Some filers in high-tax states, meanwhile, have found they owe more than they expected because of new limits on deductions for state and local taxes — the so-called SALT cap — including for real estate taxes.

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Some people may have heard reports about smaller refunds or of filers having to write checks for balances due, and postponed their own filing, said Cindy Hockenberry, director of tax research and government relations at the National Association of Tax Professionals.

But now, the filing deadline is fast approaching. Tax Day is April 15 for people in most parts of the country (though it’s April 17 in Maine and Massachusetts).

Because of the changes in the federal tax law, people who haven’t filed yet may want to hire a professional preparer unless they have a simple return, said Mark Luscombe, principal federal tax analyst for Wolters Kluwer Tax & Accounting. But as the deadline approaches, Mr. Luscombe cautioned, some tax advisers may suggest that filers opt for an extension so they can devote adequate time to completing the return.

Filers can obtain an automatic extension, which gives another six months to file, by submitting Form 4868.

But an extension to file doesn’t include an extension to pay. You must make your best estimate of what you owe and pay by the April deadline or face interest costs and penalties.

There’s always the option of using a do-it-yourself software program, including those available for income-eligible filers through the federal government’s “free file” program. The latest I.R.S. statistics show self-prepared returns up about 2 percent over last year.

Ms. Hockenberry said one reason for the increase in self-prepared returns is that the standard deduction has doubled under the new tax law, meaning that fewer people are seeking advice about itemizing. Also, she said, many consumer tax software programs now offer filers the option of speaking with a professional for an extra fee.

TurboTax, for instance, offers TurboTax Live, which lets users ask questions of a C.P.A. or an enrolled agent.

Consumer Reports advised caution this year, however, after one of its reporters tried four online commercial tax products and encountered flaws like outdated information and incomplete advice. The nonprofit group said it could not endorse any of the major D.I.Y. products “without some reservation,” and concluded that it “may be a better option” to use a professional this year, especially if you have a complex return or own a business.

The I.R.S. has a directory of tax professionals, including certified public accountants, lawyers and enrolled agents, who are federally licensed tax preparers.

Fees for professional tax preparation vary widely, by location and by the complexity of the return. The National Association of Tax Professionals found in its 2018 fee study that the average cost for an individual return was about $217.

People who want in-person assistance but can’t afford to pay a professional may be able to find free local help through programs like AARP Foundation Tax-Aide and the federal government’s Volunteer Income Tax Assistance Program.

Last year, the AARP program helped with the filing of more than 2.5 million returns.

Tax-Aide sites offer no-cost free return preparation from I.R.S.-certified volunteers who specialize in helping older and low- to moderate-income filers. Some locations accept walk-ins but others require an appointment, so it’s best to check by calling after you find a location online, said Lynnette Lee-Villanueva, vice president of AARP Foundation Tax-Aide.

If you’re planning on calling the I.R.S. help line with questions, the I.R.S. notes that wait times will only increase as the deadline approaches. Call volume is highest early in the week, so wait times are likely to be especially long on April 15 because it falls on a Monday, said Mr. Smith, the agency spokesman.

People tracking refunds, he said, are encouraged to use the I.R.S.’s “Where’s my refund?” tool, available online or via a mobile app.

Here are some questions and answers about tax filing season:

What if my tax refund was smaller than I expected?

A small refund is generally a good thing because it means you accurately estimated the amount of tax you were supposed to pay during the year. But if you prefer to use a refund as a sort of forced savings plan, you can have more money withheld from your paycheck during the year by filing an adjusted Form W-4 with your employer. The fewer “allowances” you claim on the form, the more tax is withheld from your paycheck, potentially leading to a bigger refund next spring.

The I.R.S. offers an online withholding calculator as part of its “paycheck checkup” tool and tax software programs like TurboTax offer free tools as well.

What if I underpaid my taxes in 2018?

Because of the change in the withholding tables, the I.R.S. is giving a break to many taxpayers who underpaid their taxes last year. Typically, you’ll owe a penalty if you paid less than 90 percent of the tax owed, either through paycheck withholding or by making quarterly estimated tax payments. But last month, the agency said it would reduce the threshold to 80 percent, down from the 85 percent announced in January. The change applies just to the 2018 tax year.

If you want to have more tax withheld to avoid writing a check next year, you should do so soon since more than three months of 2019 paychecks have already been issued, Ms. Hockenberry of the tax professionals association said.

Is there any way to reduce my 2018 taxes at this point?

There are still a few options left to help reduce your tax bill for 2018, like contributing to an individual retirement account, Ms. Hockenberry said. Contributions to traditional I.R.A.s may be deductible, depending on your income, and can be made for the 2018 tax year until the April filing deadline. Fidelity Investments said that last year, about a third of contributions to its I.R.A.s were made in the three weeks before the tax deadline.

You may also contribute for 2018 to a health savings account until the tax filing deadline. The accounts, however, are available only to people with specific high-deductible health insurance plans, so make sure your plan qualifies.

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