We’re already several days into 2018, and taxes are on a lot of people’s minds. Thanks to the recent passage of new tax-reform laws, a lot of Americans will be watching their returns closely this year to make sure they get their last bite at some expiring tax breaks.
As with any year, if you have a refund coming, you want to file as soon as you can.
In addition, just because the IRS will start accepting tax returns on Jan. 29 doesn’t mean that you can expect prompt action in every case.
You should pay particularly close attention to the following issues to make sure that you do everything you can to get your refund promptly.
Why is tax season starting so late?
Often, the IRS starts accepting returns roughly a week before the Jan. 29 date it set this year. The main reason that the agency gave was that it needed to “ensure the security and readiness of key tax processing systems in advance of the opening, and to assess the potential impact of tax legislation on 2017 tax returns.” Given that the tax-reform bill became law late in December, it might seem fairly reasonable to expect the IRS to want some extra time to verify the situation.
Yet nearly all of the provisions of the new tax reform laws went into effect on Jan. 1 and apply only to the 2018 tax year and beyond. That confuses many taxpayers, but the returns that you file in the first few months of 2018 are for the 2017 tax year, and so very few major changes will actually apply during this particular filing season. Nevertheless, taxpayers won’t have any choice but to wait.
Electronic filing still has an advantage
The IRS pointed out that many tax professionals and software companies will accept tax returns prior to the beginning of tax season and then submit them in batches once the IRS is willing to accept them. The agency also noted that both electronic and paper tax returns will get accepted as of the Jan. 29 date.
However, electronic filing still has an advantage, because the IRS has said that paper returns won’t actually start processing internally until mid-February, due to the need to keep its systems updated. Given that refunds can take a lot longer to go out on paper returns, taxpayers should strongly consider e-filing if they can do so without extremely high fees.
Some taxpayers will have to wait on refunds
A change in the tax law that took effect for the 2016 tax season effectively delayed refunds for certain filers, even if they filed on the earliest available date. The PATH Act established a new rule that prevents the IRS from issuing refunds on returns that claim either the earned income tax credit or the additional child tax credit until mid-February. Accordingly, the IRS warned taxpayers that this year’s refunds likely wouldn’t hit taxpayers’ accounts until at least Feb. 27, a full four weeks after the beginning of tax season.
The PATH Act’s provisions aimed to prevent abuse from the use of the credits, which are two of the most popular tax breaks that allow for taxpayers to receive refundable credits, even if they don’t otherwise owe any income taxes. The IRS will process filings that include the earned income tax credit or additional child tax credit under its ordinary schedule, but will simply hold back refunds until permitted to issue them by law.
Don’t rush it
Finally, it’s important not to file before you have all your relevant information. Employers aren’t required to send W-2s to workers until Jan. 31, and many other vital tax forms have similar, or even later, deadlines. Rushing to file a return only to discover later that you have incomplete information will require you to do an amended return. In the worst-case scenario, it could also cause enough confusion at the IRS to prompt a potential audit.
Even though tax season will start a bit late in 2018, you’ll still have plenty of time to get your return prepared and filed. By keeping these issues in mind, you’ll be able to avoid pitfalls that could delay your refund and ensure that you’ll do everything possible to expedite the process going forward.
— Dan Caplinger[ad#fool]
Source: The Motley Fool