Itemize Tax Deductions

The Child Tax Credit changed considerably in 2018. The standard deduction nearly doubled for 2018, leaving many taxpayers wondering whether it’s financially worth it to itemize on their tax returns anymore.

SEBRING — If you’re a taxpayer who waits until the last minute before the tax filing deadline, today is the last minute.

Those who don’t file by today and don’t file for an extension, could face a penalty from the Internal Revenue Service and interest on unpaid taxes, said Renée Bennett of MECPA L.L.C., individual and business accountant and tax consultant services.

However, Bennett said getting started now with a review of your withholding and exemptions could help you to avoid owing tax next April 15 or paying too much tax during the year.

Tax season is always a stressful time, Bennett said, not the least for people who’ve worked for her firm: In addition to being up on the latest tax laws and computer software, they need to be able to do it all by hand — on paper — in case power fails or computers crash.

“IRS deadlines don’t stop just because the computers do,” Bennett said.

For the last couple of years, because of federal holidays or April 15 falling on a weekend, that deadline has been adjusted, but not this year.

This year, it’s absolute, Bennett said: Postmarked or filed electronically by April 15.

Even if a household files an extension or gets the return postmarked in time, the IRS will want reasons for why the income tax return couldn’t be filed electronically.

Bennett recommends those filing by mail to make a return receipt request. Without it, the taxpayer has no good proof he or she mailed the return before the deadline.

The taxpayer will have until Oct. 15 to avoid a filing fee, but might still have a late filing fee, a late payment fee or a fee for payment errors, if all of the documents don’t match up.

Those penalty payments have gone up, too, Bennett said. How much depends on how much tax the person has paid and/or owes.

What do I owe?

That is subjective, Bennett said, dependent on their family and household situation.

The new tax laws, with significant reductions in tax credits, won’t actually take full effect until the 2019 returns, Bennett said, due April 15, 2020.

There have been tax credit reductions for lower income families and a reduction in what people can do to reduce their tax burden.

For example, people with five in the house may not be able to take a $4,000 exemption for each person.

“That’s gone now,” Bennett said.

In its place is an increased standard deduction and the tax credits available for dependents.

That may close the gap for some people whose income has increased, but not everyone. It’s a “mixed bag,” Bennett said. Each case is subject to its own conditions, who lives in the household and who is a dependent of the taxpayer.

What about 2019?

If a person had enough tax withheld from paychecks to cover 85 percent of their tax burden by Jan. 15, 2019, they could expect to do well on their returns.

That date should have been the deadline to pay in 95 percent of the obligation, Bennett said, but the president held it to 85 percent this year for people to get prepared for the new tax laws.

For tax year 2019, Bennett recommends people plan now, either through a service like hers or through IRS online tools, to have enough tax withheld and arrange their finances to reduce that tax burden.

“A lot of people worry if they’re getting a refund,” Bennett said. “We look at the actual tax: Have you done the most you can do to reduce that tax.”

Withholding more money and having it refunded is one method, Bennett said, but having the right amount withheld leaves the rest in a taxpayer’s pockets throughout the year.

With changes in the tax code, people who haven’t had to plan may want to do that.

“People are a little surprised that they owe so much,” Bennett said.

Now or later?

People can do a tax checkup right after April 15, but June is a good time, also, for a mid-year checkup, Bennett said.

There are changes people can make before the end of December in any given year, or before the April 15 filing date for that year, such as contributing to an individual retirement account or a health savings account, right before filing.

People can test such strategies, to see if it saves significant taxes, Bennett said.

“Sometimes it’s a few hundred dollars. Sometimes it’s a few thousand,” Bennett said, adding that it’s just a matter of minimizing taxes and working with an expert to help you find those details.

“That’s the fun part of what I do,” Bennett said.

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