Are you ready for April 15? Tax Day is right around the corner, and it’s high time to think about tax preparation. A few hours spent on your taxes now can save your time and money in April. The Internal Revenue Service has reported more than 53 million Americans who prepared and efiled their federal tax returns themselves as of May 2018. This year the Tax Cuts and Jobs Act (TCJA) will affect returns of taxpayers forcing them to be extra cautious. According to a TaxAudit survey of 2500 people released last February, about 77% workers felt confused about the TCJA.
If you want to get your taxes done on time, do not wait until the last minute and start preparing right now with our helpful guide. Below you’ll find useful information about tax preparation software, tax professionals, changes in tax laws as well as useful tax preparation checklist.
Tax Preparation in 2019
The filing deadline for your 2018 tax return (Form 1040) is April 15, 2019. Individuals who live in Maine and Massachusetts can file their 2018 Form 1040 until April 17, 2019 because April 15, 2019 is Patriots’ Day, and April 16, 2019 is Emancipation Day. Final extended deadline to file individual tax returns for 2018 is October 15, 2019. Businesses tax deadline dates in 2019 are as follows:
- Original tax deadline for partnerships (Form 1065) and S Corporations (Form 1120S): March 15, 2019.
- Original tax deadline for C Corporations (Form 1120): April 15, 2019.
- Original tax deadline for exempt organizations (Form 990): May 15, 2019.
- Extension tax deadline for partnerships and S Corporations (Form 7004): September 16, 2019.
- Extension tax deadline for C Corporations (Form 7004): October 15, 2019.
- Extension tax deadline for exempt organizations (Form 8868): August 15, 2019
The abovementioned tax forms are available here.
Tax season can be stressful. So, you should plan ahead to get ready. Here are the basic steps of the tax preparation process:
1. Gathering tax documents
The forms to complete can be mailed out. They can be also available electronically from the end of January.
2. Estimation and paying tax owed
Look through your tax forms to check whether you owe any tax. Otherwise, you may have interest and penalties. April 16th is the date when penalties start accruing. The IRS will charge interest on late or unpaid taxes, regardless of cause.
3. IRA (individual retirement account) contributions information
Form 5498: IRA Contributions Information reports your IRA contributions to The Internal Revenue Service (IRS). Contribution limits are $5,500 or $6,500 if you are age 50 or older, for both traditional and Roth IRAs (a type of IRA that lets an investor save up to a certain amount of after-tax dollars each year. The earnings in the account grow tax-free, and distributions taken after age 59½ (if the account has been open at least 5 years) are exempt from taxes) combined. You can make IRA contributions online on website https://fidelity.com/. Here are the available types of them:
- You can sell a Fidelity mutual fund in a mutual fund account and use the cash amount to contribute to a mutual fund IRA and buy a mutual fund.
- You can sell a Fidelity mutual fund in a mutual fund account and contribute the cash amount to a brokerage IRA.
- You can use cash from a brokerage account to contribute to a mutual fund IRA and buy a Fidelity mutual fund.
- You can contribute cash from a brokerage account to a brokerage IRA.
4. Filing for an extension
If there is a situation when you may miss a deadline for filing taxes or make mistakes because you're in a rush, you should request the extension. In order to get a 6-month extension, there are different forms:
- Partnerships, S Corporations, and C Corporations use Form 7004.
- Individuals use Form 4868.
- Nonprofit and charity organizations use Form 8868 to request a 3-month extension.
5. Letting your Certified Public Accountant (CPA) know about major life changes to avoid an overpayment
Taxes are not static. Changes in your family or income situation impact your tax situation. When filing taxes, you have to inform about the following:
- Changes to your marital status.
- Having a baby, or claiming dependents - reduces your tax rates, gives access to the Child Tax Credit, tax benefits like credits for education to the Earned Income Tax Credit.
- Educational expenses - The American Opportunity Credit and the Lifetime Learning Credit can help offset $2,000 or more of your qualifying educational expenses. If you're paying off a student loan, you can deduct up to $2,500 of your interest on your taxes. The cost to obtain certain professional certifications or designations can also be written off on your taxes.
- Retirement contributions and distributions.
- Inheritance is tax-free.
- Starting or finishing (an expat assignment). Expats receive an automatic 2-month extension.
Tax preparation is a real challenge for most people who are not sure if they should seek for professional assistance or do it themselves. Sometimes, it is better and easier to consult with a tax professional to learn what are state taxes and to pay your tax liability on time. There is a strong demand on tax preparation services because of the task complexity and importance. Looking for a reliable tax preparer you had better read reviews and users’ feedback not to get ripped off. There are many tax preparation companies on the market so that you may easily come across non-professionals like the following Pissed Consumer user who shared the experience with HR Block:
“I had to read her the IRS directions so she would correct her mistake. She completely messed up Form 8863, but after struggling to get her to fix it, we just decided to buy the audit protection. Then she told us Refund Advance ended on 2/11/19, so we had to show her the H&R Bock website stating it was available through 2/28/19.
So, after spending 1.5 hours teaching the MANAGER how to do her job, and paying Over $400 in total fees, we were happy to be out of there with a $3000 loan against our $4300 refund. BUT NO , we got a text minutes later saying we would only get a $500 advance!!! NEVER again will I use H&R Block, and I will warn everyone I know about the incompetency of their “tax professional” and the unfair lending practices.”
Another Pissed Consumer user had to pay over $2000 in penalties because HR Block failed to submit the tax returns:
“failed to submit my returns to fed and stat i had to pay over 2000.00 in penalties and have met with at least 4 people that call themselves mangers and more that 15 trips to their office and still getting the run around. They have no intention of paying me what they owe short of getting a lawyer.”
If your tax preparer acted improperly, you can report a complaint using the following methods:
- The way of a misconduct report depends on what you received: a notice, a letter, or received nothing:
- If you received a notice or a letter from the IRS, complete Tax Return Preparer Fraud or Misconduct Affidavit Form 14157-A and Complaint: Tax Return Preparer Form 14157. Mail the IRS with all supporting documentation and a copy of the notice or letter to the address contained in that notice or letter.
- If you did not receive a notice or a letter from the IRS, complete Tax Return Preparer Fraud or Misconduct Affidavit Form 14157-A and Complaint: Tax Return Preparer Form 14157. Mail them with all supporting documentation to the address where you would normally mail your Form 1040.
- If you suspect your identity was stolen, use Form 14039.
- If you want to report alleged tax law violations by an individual, a business, or both, use Form 3949-A. Submit to the address on the Form 3949-A.
While filing tax returns and gathering the necessary documentation, you should also think of how does taxes work including the following points:
- Itemized deductions or a standard deduction. Itemized deductions are claimed on Schedule A of Form 1040, which must be attached to your annual tax return. It is usually claimed in case of state and local taxes, gifts to charity, home loan interest, tax preparation fees, medical and dental expenses. A standart deduction is a fixed dollar amount, based on your filing status and age, that the IRS lets you take off (deduct) from your taxable income.
- Business expenses. Claim certain items as business expenses during the year and justify them to the IRS.
- Donations and dues as a tax deduction. Add receipts to your documentation and provide with the information on how much you have donated.
- Finance documents. Bank e-statements, credit card e-statements, retirement account information put in a tax folder.
Personal Finance Software
Going to a professional would mean spending extra cash. Tax preparation fees vary by the company. Some charge an hourly rate while others have set fees based on the complexity of the task. But if you have enough time and your tax situation isn’t very complicated, personal finance software can be a possible solution.
Tax preparation software is aimed at simplifying tax operations. It allows people to file tax returns for themselves. The most commonly used are Quicken and TurboTax. They are mostly free (or a fee of $40 on TurboTax) and comprehensive. Some tax return software companies including TurboTax also provide users with the assistance of a real tax preparer. You can either type in your question or schedule an appointment with an expert.
However, you can also come across some problems. In the following tax service review, a person complained about the quality of Turbotax:
“Looked at my Turbotax return, clicked "How did you calculate this number?" It says: The annual total of advance premium tax credit amount is calculated by first rounding each of the Column C values in Part III of your 1095-A to the nearest dollar and then adding them all together. THEY ROUNDED! The form doesn't say to Round! It says, enter the numbers from Columns A, B and C!!! So I have to refile my 8962 and move to the back of the line to wait for my refund.”
The customer came across the system that worked badly. He needed help from customer's service which didn't help, just mailed.
The solutions of this issue may be:
- To read tax service reviews about software on a website like www.pissedconsumer.com.
- To try out a demo version and read properly all the details about the product.
- To use the IRS Free File to prepare and file your federal income tax return for those who qualify or the IRS Free Fillable Forms for all taxpayer. These free tax preparation online resources are affordable and secure.
- To use the IRS Volunteer Income Tax Assistance and the Tax Counseling for Elderly programs which are developed to provide free tax help and e-file for tax payers who qualify.
Changes in Tax Laws in 2019
This is the first year when the Tax Cuts and Jobs Act will affect taxpayers’ returns. So, what’s new according to IRS.gov. To name a few:
- Forms 1040A and 1040EZ are no longer available. Individuals will file Form 1040 for tax year 2018.
- Form 1065-B cannot be filed for tax years beginning after 2017.
- For 2018 most tax rates have been reduced. They are 10%, 12%, 22%, 24%, 32%, 35%, and 37%. In addition, the new tax rates applicable for the child’s unearned income of more than $2,550 are 24%, 35%, and 37%.
- The Tax Cuts and Jobs Act nearly doubled tax reductions. Starting in 2018, single filers and married couples filing separately are entitled to a standard deduction of $12,000 (up from $6,350 in 2017). For heads of household, the standard deduction this year is $18,000 (up from $9,350 in 2017). For a married couple filing jointly it is $24,000 (up from $12,700 in 2017).
- The Tax Reform also made changes to itemized deductions: for 2018 you can deduct the part of your medical and dental expenses that is higher than 7,5% of your adjusted gross income. Your total deduction for state and local income, sales and property taxes is limited to $10,000 ($5,000 for a married couple filing separately). Limit on overall itemized deductions is suspended.
- Deduction for personal exemptions is suspended.
- For 2018, child tax credit is increased to $2,000 per a qualifying child. The additional child tax credit up to $1,400 can be refundable. The income threshold at which a child tax credit begins to phase out is increased to $200,000 (and $400,000 for a married couple filing jointly).Your child must have a Social Security Number issued by the Social Security Administration before your tax return deadline date (including extensions) to be claimed as a qualifying child for the Child Tax Credit or Additional Child Tax Credit.
- A new credit of up to $500 is available this year for all of your qualifying dependents other than children. Children without a valid SSN may qualify for the Credit for Other Dependents.
- The alternative minimum tax exemption amount is increased to $70,300 ($109,400 for a married couple filing jointly or qualifying widow(er), $54,700 for a married couple filing separately). The income level at which the alternative minimum tax exemption begins to phase out is 500,000 (and $1,000,000 for a married couple filing jointly) this year.
Tax season is not a last-minute deal. Good tax preparation can make this process much easier and you can become one of the 34% of Americans who like this period. However, if you face any issues with companies you engage for this purpose, you should know if those qualify as financial complaints as we all as know how to submit them.
- changes in tax law in 2019
- HR Block reviews
- Intuit Turbotax Tax
- personal finance software reviews
- tax returns reviews
- tax season
- tax service complaints
- Tax Software Reviews
- tips to prepare for a new tax season
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