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Free Access to Quality Tax Software

Reduced number of itemizersIf you prepare your own tax returns, be sure to find out whether you can use one of the free offerings from leading software providers. Because of changes in the tax law, millions more taxpayers will qualify for these free offerings than in the past. Here’s our practical guidance on the best alternatives:

details: Free Filing From Software Providers

More Leeway on Estimated Tax

Waiver of penalty if you paid at least 85%.
For 2018, IRS will waive the underpayment penalty if you paid at least 85%.

As a general rule, we’re required to pay our federal income tax over the course of the year through withholding, estimated tax payments, or a combination of the two. Unless an exception applies, you pay a penalty if these payments total less than 90% of your tax liability. The tax law that took effect in 2018 changed so many rules that we can expect a larger than usual number of taxpayers to fall short of 90% that year. The IRS says it will waive the penalty if you paid at least 85%. The waiver isn’t automatic, though: you have to file Form 2210.

details: Estimated Tax Penalty Waiver for 2018

Shutdown Won’t Prevent Tax Refunds

Updated

Reversing course, the Trump Administration announced today that the government shutdown will not prevent the IRS from sending income tax refunds to taxpayers. The first posting of this item mentioned that a question had been raised as to whether it is legal to do so. In a subsequent information release, the IRS says Congress directed the payment of all tax refunds through a permanent, indefinite appropriation, and that the Office of Management and Budget, which had previously directed the IRS not to pay refunds during a budget impasse has reviewed the law and concluded that it may so so.

The release also sets January 28 as the date it will begin processing returns.

In their words: irs information release

AMT Repeal?

Reduction in number of AMT taxpayersHave you heard that the Tax Cuts and Jobs Act repealed the alternative minimum tax (AMT)? Probably not, because the AMT survived. Yet it’s been whittled down to a shadow of its former self. For nearly all taxpayers, AMT repeal is a practical reality.

featured article: AMT Repeal, for Most

Note: This article kicks off a series on the profound changes made by the Tax Cuts and Jobs Act.

Shutdown May Delay Refunds

Update: as explained here, the IRS now says it will be able to pay refunds during the shutdown.

The 2019 tax season was already bound to be challenging. We can expect plenty of confusion in the first filing season under a law that made sweeping changes affecting taxpayers in all categories. Add to that a complete redesign of Form 1040, taking a modular, block-building approach and eliminating the 1040-EZ and 1040-A versions. The IRS is still scrambling to get its form instructions and information publications in final form, and has yet to announce a date for the start of the filing season.

Now the IRS faces these challenges under the handicap of a partial government shutdown. Essential functions at the agency continue, including — when they’re ready — accepting tax returns and payments. According to the Wall Street Journal, however, the IRS generally doesn’t pay refunds during a shutdown.

Any substantial delay in paying refunds would produce hardship for millions of Americans who depend on receiving a substantial check as early as possible in the year. Tax refunds, which total hundreds of billions of dollars, also boost retail sales and the general economy. A shutdown that delays those refunds would have consequences for all of us.

New Form 1040 Now Available

The IRS has completely redesigned Form 1040, using what they call a building block approach, where the form itself is much shorter but is supplemented as needed by up to six new schedules. As a result, the same form can be used by all taxpayers, from those with the simplest to the most complicated returns. The new form, its 117-page instructions, and the new schedules are available now: About Form 1040

Tesla Tax Benefit to Ratchet Down

Hoping to settle into a Tesla? Best move fast, if you want that tax credit. Because the company passed a threshold of 200,000 eligible vehicles sold, the tax subsidy for its cars will wind down as follows:

  • The full $7,500 tax credit will be available only until December 31, 2018.
  • For the first half of 2019, eligible vehicles will qualify for half that amount ($3,750).
  • For the second half of 2019, the figure is $1,825.
  • Teslas purchased after the end of 2019 will not qualify for the credit.

Wash Sale Details

Articles on year-end tax planning for investors inevitably mention the opportunity to harvest losses from stocks and other securities that may have declined in value. Recent stock market declines have increased the potential value of this opportunity, along with the importance of understanding the wash sale rule, which can stand in the way of efforts to harvest losses while maintaining a consistent investment strategy. No doubt you’ve seen brief summaries of this provision, but there’s a lot more to the wash sale rule than meets the eye. Get the full details here:

details: Wash Sale Rule

Free File Enhancements

The IRS has announced enhancements to the Free File program, through which many taxpayers can obtain free tax preparation services from commercial software companies. Some aspects of this program continue to be frustrating, but millions of taxpayers have found it useful, and it is now less likely that you’ll be snared into paying for tax prep while you still qualify for Free File.

details: IRS Free File