TAX TIME TIPS
The IRS will start accepting the income tax returns Monday, and this year you'd be well-advised to file sooner rather than later. Here's why:
Refunds should be rather large this year, especially for those claiming Earned Income Credit and the child tax credit.
For most folks, this tax season will be "refund season," and their refunds should be bigger. For most taxpayers with children, their refund is expected to be about 10% higher than last year.
While it's true that the Tax Cuts and Jobs Act eliminated a number of employee-itemized expenses for taxpayers who typically claim these expenses, they will pay a larger tax bill and will be a smaller portion of all filers. According to IRS data, only 30 percent of filers for 2016 claimed any itemized deductions on Schedule A. Over 103 million of the roughly 150 million returns filed claimed the standard deduction.
Since the new tax law nearly doubled the standard deduction for 2018, $12,000 for single filers and $24,000 for married couples, more people will claim the standard deduction, and most should see a larger tax refund. Keep in mind that these changes are also eliminating personal exemptions.
Claiming tax credits can slow things down.
Another reason to file early is to get to the front of the queue of tax returns selected for additional review. This will affect the many returns that include claims for certain tax credits, which will take additional time for the IRS to process because they are subject to additional administrative oversight.
This applies to the millions of filers who claim the Earned Income Tax Credit and Additional Child Tax Credit. According to the 2016 tax returns filed, about 28 million tax filers claim the EITC, and nearly 22 million tax returns included claims for the ACTC. For 2018, the EITC can be about $519 for people who have no children all the way up to $6,431 for those with three or more qualifying dependent children. The child tax credit was doubled to $2,000 for each dependent under age 17, and up to $1,400 of that credit amount is fully refundable to lower income taxpayers. Refundable tax credits are money you get back, even if you pay zero taxes.
By law, the IRS must hold refunds for filers claiming these tax credits until mid-February, even if the tax return was filed on January 28 (the earliest date the IRS accepts tax returns this year.) The delay in processing returns claiming the EITC and ACTC gives the IRS more time to detect refund fraud. Scammers know how simple it is to file a fake tax return with no income, claim the EITC and ACTC, and receive a big check from the Department of the Treasury. As a result, tax returns claiming these credits are being more closely scrutinized by the IRS.
According to the IRS, the earliest they expect to process tax refunds for tax returns claiming the EITC and ACTC making the money available in tax payers bank accounts and debit cards is beginning Feb. 27. Expect an additional few weeks delay for folks who choose to receive their tax refunds by check or have errors on their tax returns. Filing your tax return quickly will ensure that you will receive your tax refund as soon as possible.
Beat fraudsters to the punch.
Filing early is also a good way to protect yourself from identity theft, a scam at the top of the IRS' list. It happens when someone uses your personal information, such as a Social Security number, to fraudulently file a tax return and claim the refund.
But if you file your return before a criminal can file one using your personal information, then the fraudulently filed tax return will be rejected by the IRS, because your legitimate return has already been accepted by the IRS. Victims of tax ID fraud should contact the IRS' Identity Theft Victim Assistance unit online or by calling (800) 908-4490. You should also file a Form 14039, Identity Theft Affidavit with your tax return.)
Finally, your money is better in your bank account than in the IRS' bank account. The IRS expects to issue over 90 percent of tax refunds in less than 21 days. If you file your return electronically and request direct deposit of your refund, you could get the money in as little as 14 days.