America’s annual visit from the taxman is less than two months away. With sweeping tax law changes in effect, the impact on the taxpayer has the potential to not only be stressful, but interesting. Many consumers will be looking to see which typical deductions will make it through the new filters and which ones will be automatically rejected.
To get the U.S. ready, the Internal Revenue Service (IRS) has created the Tax Time Guide -- a series of resources to help taxpayers get and stay on track for preparing an accurate tax return.
The changes are a cornerstone of President Trump’s campaign promises. ConsumerAffairs reported earlier that most consumers will see an increase in their take-home pay under new tax withholding tables. That's largely due to a nearly doubling of the standard deduction to $12,000.
"Our massive tax cuts provide tremendous relief for the middle class and small business, to lower tax rates for hard-working Americans," Trump said. "Millions of Americans will have more take-home pay, starting next month. A lot more."
Last fall, the IRS released an online publication called Tax Reform: Basics for Individuals and Families. Available to read, print, or download here, Publication 5307 provides a run-through of these and other key changes affecting tax returns:
Tax rates were lowered. Starting in 2018, there are seven income tax brackets, ranging from 10 percent to 37 percent.
The standard deduction nearly doubled over last year. For 2018, the basic standard deduction is $12,000 for singles, $18,000 for heads of household, and $24,000 for married couples filing a joint tax return. Higher amounts apply to people who are blind or filers who are at least age 65. The increased standard deduction, coupled with other changes, means that more than half of those who itemized their deductions – for mortgage interest, charitable contributions, and state and local taxes – in tax year 2017 may instead take the higher standard deduction in 2018, according to IRS projections.
Various deductions have been limited or discontinued. For example, the state and local tax deduction is limited to $10,000 -- $5,000 if married and filing a separate return -- and new limits apply to mortgage interest. In addition, the miscellaneous itemized deduction for job-related costs and certain other expenses is not available.
The Child Tax Credit doubled, and more people now qualify. The maximum credit is now $2,000 for each qualifying child under age 17. In addition, the income limit for getting the full credit is $400,000 for joint filers and $200,000 for other taxpayers.
There is a new credit for other dependents. A $500 credit is available for each dependent who does not qualify for the Child Tax Credit. This includes older children and qualifying relatives, such as a parent.
Personal and dependency exemptions were suspended. This means that an exemption can no longer be claimed for a tax filer, spouse, and dependents.
“Changes from the Tax Cuts and Jobs Act mean the standard deduction is worth almost twice what it was before,” the IRS explains in its video series on the new law. “So, you may get more benefit from the standard deduction than from itemizing.”
Update your identity protection
Securing personal identity is becoming more and more difficult as time goes on. Whether your identity has been stolen and put up for sale on the “dark web” or you’re looking for a way to protect your identity going forward, it’s important to know that the IRS is taking extra precautions to make sure taxpayers really are who they say they are.
“[Consumers should] be prepared to verify their identities if they need to call the agency. Being prepared before a call or visit can save taxpayers multiple calls,” the IRS says. “IRS call center professionals take great care to make certain that they only discuss personal information with the taxpayer or someone the taxpayer authorizes to speak on their behalf.”
To make sure you’re not caught up in an endless loop of phone calls trying to prove who you are, the IRS reminds taxpayers to have the following ready:
Social Security numbers (SSN) and birth dates for those who were named on the tax return.
An Individual Taxpayer Identification Number (ITIN) letter if the taxpayer has one in lieu of a SSN.
Filing status – single, head of household, married filing joint, or married filing separate.
The prior-year tax return. Telephone assistors may need to verify taxpayer identity with information from the return before answering certain questions.
A copy of the tax return in question.
Any IRS letters or notices received by the taxpayer.
“It really is me, I promise…”
Tax season can be a windfall for ID bandits on the prowl. In comments to ConsumerAffairs, Scott Grissom/SVP at IDShield said most common things to worry about are:
A criminal using your stolen Social Security number to file a tax return claiming a fraudulent refund.
A criminal fraudulently gaining access to your account online and redirecting your tax refund to another location or account.
“With recent data breaches, it is easy for criminals to find your Social Security Number online or fraudulently access your online tax and tax preparation accounts using compromised credentials,” Grissom said.
One last suggestion is to double-down on updating usernames and passwords. Google, for one, recently installed new measures to up identity protection. If you’d rather do the work yourself, however, Grissom recommends that you...
Use a unique username and password that is not your email address on your IRS account or any tax preparation site you use.
Watch your tax account to ensure that only one tax return was filed using your Social Security Number for your state and federal taxes.
Read all emails and notices sent to you from the IRS or your state tax agency to ensure you recognize the activity they are referencing. They may send letters saying they have identified a suspicious return using your Social Security number.
Monitor your identity. There are many warning signs of identity theft, such as address changes, that can tip you off that someone has stolen your identity.
If you smell a rat and think you might have been victimized by a tax defrauder, take action quickly. First, contact the IRS at 800-908-4490; fill out and submit IRS Form 14039, Identity Theft Affidavit; then contact your identity theft protection provider if you have one.
It would also be wise to file a complaint with the Federal Trade Commission at identitytheft.gov and ask the three major credit bureaus to put a ‘fraud alert’ on your credit records: