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

Retirement Plan Contribution Limits for 2019

The IRS has announced increases in the amount you can save for retirement in 2019. The IRA contribution limit goes from $5,500 to $6,000, and the elective deferral limit (for 401k and similar plans) goes from $18,500 to $19,000. There is no change in the additional amount individuals age 50 or older can contribute as makeup contributions.

Be careful: You can make an IRA contribution for 2018 until April 15, 2019, but the lower $5,500 limit applies to contributions for 2018 even if made in 2019.

Roth IRA Contributions

How well do you know Roth IRA contributions? Learn how the income limitation works, how to get around that limitation with a backdoor contribution, and limitations on that technique. Is there really such a thing as a spousal IRA? What about Roth IRAs for minors? Is it possible you’ve overlooked the retirement savings contribution credit? Our pages dealing with contributions to Roth IRAs have been updated to reflect changes in the law that took effect in 2018.

detailsContributions to Roth Accounts