GREENSBORO, NC -- It's the first day of tax season. With the recent Tax Plan passed, there’s a lot of questions about what has or hasn’t changed for this year’s filings.
Ryan Dodson with Liberty Tax Advisors is joining 2WTK to answer several of the top questions.
“Most of the changes are for next year, the 2018 taxes you'll file in 2019. The main change this year is the lowering of the medical expenses limitation from 10% that was implemented with the ACA (Obamacare) back to the historical 7.5% limit.”
Everyone's withholding just changed because of the recent tax law changes, does this mean refunds will go up next year?
“Nope. Just because tax rates go down, it doesn't necessarily mean that refunds will go up next year. You will need to check your withholdings to make sure you are having enough withheld.”
When tax rates change, the IRS changes the payroll withholding schedules. These schedules are set by the selections employees make on their W-4 forms. Since almost everyone's tax bracket is going lower, the IRS has adjusted the withholding schedules to not withhold as much as last year, so everyone should see their net pay increase. However, just because their tax rate is lower, does not mean their refund will go up next year. For example, three years ago when North Carolina lowered their tax rates from 7.75% to 5.8%, everyone's withholding was adjusted. As a result, when folks filed their tax return approximately 50% of my clients received a refund. And the refund they received was in the $100 - $300 range. By comparison, the previous year almost 85% of my Liberty Tax clients would get a refund from North Carolina averaging in the $400 - $700 range.
“I encourage taxpayers to look at their withholdings and use these numbers to estimate their taxes for 2018. It could prevent surprises when they file their taxes next year in 2019.”
The best way to keep your tax refund out of a hacker's hands is: file early. The IRS only accepts one tax return electronically. Once criminals have your information, names, dates of birth, social security numbers, they can file false/fraudulent tax returns in your name.
Between the Equifax breach and the many breaches from stores and fast food chains, tax fraud happens. And IF it does, you file and it's flagged because someone already filed.
File form 14039 with the IRS. Not only will this help in processing your current year tax return, once you have filed this form, every year thereafter the IRS will issue you an IP-PIN every year. This number will be required for the IRS to accept your return.