If 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:
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.
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.
Have you heard that the Tax Cuts and Jobs Act repealed the alternative minimum tax (AMT)?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.
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.