January is tax-prep month
Posted on January 8, 2020
With the holidays behind us, the CPAs at Teipen Selanders Teipen & Ayres reminds taxpayers that the ideal place to be for the upcoming tax season is to be prepared and as much as possible, work ahead of schedule.
Here’s what you can do now to get ready for the tax-prep season just a few short months ahead:
- Update personal information ASAP –
If you have moved during 2019, you must notify the US Postal Service, your employers, and the IRS. Use IRS Form 8822, Change of Address, of your address change.
- Taxpayers who purchase health insurance through the Health Insurance Marketplace should also notify the IRS when they move out of the area covered by their current plan.
- For name changes due to marriage or divorce in 2019, you must notify the Social Security Administration ahead of filling, so your new name will match IRS and SSA records.
- Also notify the SSA if a dependent’s name has changed. A mismatch between a name shown on your tax return and SSA records often causes refund delays.
- Practice good recordkeeping – Always keep copies of tax returns. You may need a copy of your 2018 return to make it easier to fill out your 2019 return.
- Charitable contributions –
For most of us, December 31st was the last day to make a charitable contribution that will impact your 2019 tax return.
- One caveat – Donations charged to a credit card before the end of 2019 count for the 2019 tax year, even if the bill isn’t paid until 2020.
- The same is true for checks to a charity. They count for 2019 if they are mailed by the last day of the year, regardless of when they are cashed.
- Retirement plans –
Taxpayers who are over age 70½ are generally required to take distributions from their individual retirement accounts and workplace retirement plans by the end of 2019.
- However, an IRS special rule allows those who reached 70½ in 2019 to wait until April 1, 2020 to receive them.
- Most workplace retirement account contributions should be made by the end of the year, however taxpayers can make additional 2019 IRA contributions until April 15, 2020.
- For 2019, the basic limit for 401(k) contributions is $19,000, plus another $6,000 for those who are age 50 or beyond.
- Total 2019 contributions to all traditional and Roth IRAs cannot exceed $6,000, (or for taxpayers age 50 and older, $7,000.)
- Some taxpayers may be eligible for the Retirement Savings Contributions Credit (a/k/a as the Saver’s Credit). The 2019 income limit is $64,000 for married couples filing jointly, $48,000 for heads of household, and $32,000 for singles and married individuals filing separately.
- Quick refunds – Filing your taxes electronically and using direct deposit is the fastest, simplest, safest and most secure way to get your refund. That said, just as each tax return is unique, so is each taxpayer’s potential refund. Although the IRS issues most refunds in less than 21 days, some may take longer as some returns require additional review and take longer to process than others, for instance:
- A delay may be necessary when a return has errors, is incomplete, or is affected by identity theft or fraud. The IRS will contact taxpayers by mail when more information is needed to process a return.
- By law, the IRS cannot issue refunds to people claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before mid-February. The IRS must hold the entire refund, including the portion not associated with the credits to help ensure taxpayers receive the refund they’re due by giving the IRS more time to detect and prevent fraud.
- If you use an ITIN –
Taxpayers with expiring Individual Taxpayer Identification Numbers (tax ID numbers for those without SSNs) can get their ITINs renewed more quickly and avoid refund delays next year by submitting their renewal application well before April 15th.
- Any ITIN with middle digits 83, 84, 85, 86 or 87 will expire at the end of this year.
- In addition, any ITIN not used on a tax return in the past three years will expire.
- ITINs with middle digits 70 through 82 that expired in 2016, 2017 or 2018 can also be renewed.
- Those who fail to renew before filing a return could face a delayed refund and may be ineligible for some important tax credits.
It pays to be organized and prepared ahead of the rush. The TSPA CPA team recommends beginning to prepare for tax filing now, pulling together appropriate online and hard copy files and other resources, and verifying that you have what you will need, up-to-date and ready for your CPA.
Let us know if you have any questions or need a qualified answer to a tax-related business or personal dilemma you may have. We can help you with information, resources and expertise.