Personal Finance

Ready, set, file: Everything you need to know about completing your 2018 return

Key Points
  • Tax-filing season begins on Jan. 28 — even amid the shutdown.
  • It’s the first time you’ll be filing under the Tax Cuts and Jobs Act, the massive overhaul of the tax code that went into effect in 2018.
  • The IRS received 154.4 million individual income tax returns in 2018, as of Nov. 23, the most recent date available. It issued more than 111.9 million refunds, averaging $2,899.
Here are your income tax changes for 2019

It seems that nothing — not even a federal shutdown — will stop the IRS from kicking off tax season.

The revenue agency has announced filing season would begin on Jan. 28. The IRS also said it would still send refunds to eligible filers amid the shutdown.

Accountants warn this filing season may be a complicated one, especially since the 2018 season marks the first time you'll be filing under the new tax code.

"It's going to be a mess," said Debbie J. Freeman, CPA and director of financial planning at Peak Financial Advisors in Denver. "I'm sure they'll accept the returns, but I don't think it'll go off without some hiccups."

Here's what you need to know to make filing your 2018 taxes a little less painful.

What's new

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This is the first tax year under the Tax Cuts and Jobs Act — an overhaul of the code that doubled the standard deduction ($12,000 for singles and $24,000 for married-filing-jointly in 2018), and eliminated personal and dependent exemptions (formerly $4,050 for yourself, your spouse and each dependent).

The law also placed limits on itemized deductions, including a new $10,000 cap on state and local tax deductions.

Filers with children will also notice the child tax credit is now $2,000 per kid under age 17. Though the amount of the credit is up from $1,000 per child, this boost is only in effect from 2018 to 2025.

Understanding the tax credits is key to maximizing tax savings.
Debbie J. Freeman
CPA, director of financial planning at Peak Financial Advisors

Taxpayers will notice that their Form 1040 has undergone a makeover. For starters, the paper copy will be shrunken down so that it's "postcard-sized" and you'll have six schedules.

"You'll have a redesigned 1040, and some lines will be combined and shifted over to other forms and schedules," said Amy Wang, a CPA and senior manager on the American Institute of CPAs' tax policy and advocacy team.

If you had a simplified tax return (Form 1040A or 1040EZ) in previous years, you won't be using these forms at all. Instead, you'll file a new Form 1040 for 2018.

Itemized or standard?

With the newly increased standard deduction, fewer people are expected to itemize their deductions. Nearly 30 percent of households itemized deductions in 2017, according to the Urban-Brookings Tax Policy Center.

That number is expected to drop to 10 percent of households in 2018.

New limits that you'll be facing include a $10,000 cap on state and local taxes. See below.

Itemizers will also encounter other limits on certain tax breaks, including the casualty loss deduction, the mortgage interest deduction and miscellaneous itemized deductions.

Click here for a list of tax breaks you may lose on your 2018 return.

Even if you suspect you'll go from itemizing to taking the standard deduction for 2018, you should resist the urge to throw out that box of receipts you've been collecting.

"Your CPA will ask for all of your details to make the assessment as to whether you should take the standard deduction or the itemized deduction," said Wang.

"Most taxpayers won't know which one is better until they do the math and find out which is higher," she said. "Sometimes it's a difference of a few hundred dollars."

Watch the mail

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If you're an employee, expect your employer to send you a Form W-2 by the end of January, detailing your earnings, retirement contributions and taxes withheld.

Businesses that hire independent contractors must give them a 1099-MISC by Jan. 31, which will have information on nonemployee income.

See below for a list of key forms and when you can expect to get them.

You will wait a little longer for other paperwork.

For instance, holders of health savings accounts — tax-advantaged accounts you can tap tax-free for qualified medical expenses — can expect a 1099-SA from the bank administering their account if they took a distribution last year.

This will arrive by mid-February.

Don't forget that even if you don't itemize, you'll need certain forms in order to apply for different credits on your taxes. See below for a few of the more pertinent forms.

"Understanding the tax credits is key to maximizing tax savings," said Freeman. "Especially with the increased child tax credit, the child and dependent care credit — that's where we focus time and energy."

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