YOUR MONEY-The IRS might be closed, but your taxes are still due
NEW YORK, Jan 3 (Reuters) – The U.S. Internal Revenue Services is closed, thanks to the government shutdown, but your taxes are still due on April 15 and that is why individuals need to proceed through tax season as if nothing is amiss, experts say.
The opening day of e-filing traditionally occurs during the third week in January. This year, however, there is still a lot of unfinished business because of the Tax Cuts and Jobs Act of 2017.
One of the most complex changes in the legislation is how to calculate income for self-employed individuals or those with partnerships. Filers need to figure out something called qualified business income and run an algorithm for a new 20 percent deduction on this income, which has a lot of phase-outs and special qualifications.
It is “way more complicated than first blush would make it seem,” said tax preparer David Tolleth in Holmdel, New Jersey.
When Tolleth looks at 2018 forms in his professional software, they are all still marked draft, including the main 1040 form. In prior years plagued by filing delays, Tolleth prepared returns and then sent them once the system was online.
“Im hoping that will happen this year, but I dont know,” he said.
Jake Johnstun, an enrolled agent tax preparer from Ogden, Utah, is not trusting his tax software, especially when it comes to qualified business income. Instead, he built spreadsheets with different variables and has been running numbers for a month and a half.
Johnstun is supposed to tape a panel discussion with three IRS officials in less than two weeks to explain the changes to tax professionals. But his slated experts are currently furloughed.
BUSY SIGNALS
Tax accountants say they get busy signals when they try to fax the Internal Revenue Service. Major software companies, meanwhile, are mostly just pinging electronic servers as they test their 2018 software updates. The IRS is not answering questions from professionals or from individuals, other than what is already publicly available on its website.
Nevertheless, most tax professionals are not worried. Even though tax preparation firm Jackson Hewitt Tax Service is not on its usual schedule of speaking with the IRS daily, chief tax officer Mark Steber does not expect chaos.
“They planned for this. They had contingency plans. It’s not their first rodeo,” Steber said.
TurboTax, the tax software service, said it is fully up to date and ready for taxpayers to start working on their returns as of Jan. 4.
“TurboTax will securely store completed returns for transmission to the IRS and States once they begin accepting e-file,” the company said in a statement.
If that e-filing day is delayed, some early filers may start to worry about their refunds. The IRS will accept tax payments during a shutdown and will charge penalties and fees on money past due, but it will not dole out refunds until everything is back up and running.
Any significant delay may back up refunds even more, which is why tax preparers say individuals should stay on track and prepare their tax materials for filing by April 15.
Some tax preparation services, like Jackson Hewitt and H&R Block, offer refund advance loans. But customers need to read the fine print and be sure to look at all fees and interest payments. Also consider the standard personal finance advice that advance loans are a last-resort option.
Filers may also find that they are not due the kind of refund they received in the past, because their withholding throughout the year changed when the new tax laws took effect.
Most companies updated their payroll calculations, and employees might not have even noticed the difference. In a recent survey by H&R Block, 47 percent of people did not even know they could change their W-4 form at any time.
“You cant really compare this year to last year,” said Lynn Ebel, director of the Tax Institute at H&R Block. “People need to be careful with expectations. This year is going to be different.” (Editing by Lauren Young and Dan Grebler)
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