The 2019 IRS tax filing season is drawing near and many taxpayers are wondering what impact, if any, the government shutdown and the new Tax Cuts and Jobs Act will have on this year's tax filing. While the IRS is doing its best to keep things as normal as possible, most of the IRS was not funded during the government shutdown that began at the end of 2018. Here are a few things to expect this year, including some special tax relief for taxpayers who may have underpaid their estimated taxes this year.
Even without a government shutdown, everyone thought the 2018 tax filing season was going to be chaotic. This is because the new tax law, the Tax Cuts and Jobs Act, took effect in 2018. Because of the many tax changes, it’s likely that millions of taxpayers underpaid their 2018 taxes during the year. This is because they had too little withheld from their pay or paid too little estimated tax. One study found it's likely that 20% of all taxpayers are in this boat.
The IRS is taking pity on these taxpayers. It is granting special relief for 2018 only to taxpayers who underpaid their taxes. So long as you paid at least 85% of your tax due, the IRS will not penalize you for underpayments. Ordinarily, you must pay at least 90% of the tax due to avoid underpayment penalties. To get this relief, you must file IRS Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, with your return. Check the waiver box in Part II, box A, of the form and include the statement “85% waiver” on the return. (IRS Notice 2019-11.)
The IRS has announced that the 2018 tax filing season will begin on January 28, 2019. That is, the IRS will begin accepting tax returns on that date. This is not much later than normal.
This date is the earliest date you can file your return. The final due date for your 2018 tax return is Monday, April 15, 2019 for most filers. Residents of Maine and Massachusetts have until April 17, 2019 to file because April 15, 2019 is Patriot’s Day and April 16, 2019 is Emancipation Day.
If you can’t meet the April 15 deadline, you can get an automatic six-month extension to file until October 15, 2018. To do so, file Form 4868. You can file it online. Filing an extension does not extend the time you have to pay your taxes. They are still due on April 15.
Why would you want to file early? Because you’re owed a refund. The earlier you file, the earlier you’ll get your refund. If you’re not owed a refund, there is no advantage to filing early.
The IRS says it will pay all refunds, even though Congress has not appropriated the money to do so. It is recalling about 46,000 furloughed workers, 40% of its entire workforce, who will work without pay to process returns and refunds. The IRS promises it will send out refunds as scheduled. Normally, if you e-file your return, you should get your refund within 21 calendar days. But, your refund will take longer if you receive the Earned Income Tax Credit or Additional Child Tax Credit. The IRS expects EITC/ACTC refunds to be available starting February 27, 2018.
Note that the 21-day period to get your refund applies only if IRS computers find nothing wrong with your return. If your return has problems, it could take longer than usual to get your refund. This is because there are fewer IRS workers available to deal with problem returns.
If you have questions and try calling the IRS for help, expect to wait a long time. The IRS is reopening its call sites, but there will be fewer people than usual on duty to answer questions. IRS offices and taxpayer assistance centers will remain closed during the shutdown.
There are several important tax breaks that periodically expire and are normally renewed by Congress. Four significant tax breaks expired at the end of the 2017 tax year:
Congress is expected to renew these and several other tax breaks for 2018 by passing a tax extenders bill that has been pending for some time. The bill should have been passed before the end of 2018, but it didn’t happen. Congress will have to pass it this year and make it retroactive to 2018. This makes everyone’s life a lot harder, but it has happened many times.
If you qualify for any of these tax breaks, you may want to wait until Congress passes the tax extenders bill (or makes it clear it won’t be passed). You can’t claim any of these deductions or credits in your tax return until they are reauthorized by Congress. Right now, they are not included in any 2018 tax returns or tax preparation software.
If you file your return before the tax extender’s bill passes, you’ll have to file an amended return to claim these tax breaks.