Get a jump on next year’s taxes

November 26, 2018 9:01 AM

Tax season is approaching fast – it’s so close now that it’s almost time to shift from year-end planning strategies to actually preparing for filing, which looks likely to start around its usual time of the second half of January.

With that in mind, consider this collection of tips from the Internal Revenue Service and other tax experts on how taxpayers and tax professionals can set themselves up to have a smoother, less surprising filing season in 2019.

Dig up last year’s return

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Some key information from the return filed this year will be need to file in 2019.

The IRS recommends keeping a copy of tax returns and supporting documents for at least the three previous year.

For instance, taxpayers using tax filing software for the first time may need to provide last year’s adjusted gross income to verify their identity. (For more information, visit Validating Your Electronically Filed Tax Return.) And for taxpayers who claim certain securities or debt losses, the service recommends keeping returns and documents for at least seven years.

Get a transcript, if necessary

Transcripts summarize tax return information and include the taxpayer’s AGI. They’re free, and available for the past three tax years – but they take at least five to 10 days to arrive (if ordered online or by phone) and as much as 30 days (if ordered by mail). Full tax returns, by the way, can take as much as 75 days, and cost $50 per copy.

Taxpayers can order transcripts online Get Transcript Online on IRS.gov; by calling (800) 908-9946; or by mail.

Planning around refunds

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Most of the IRS advice around refunds amounts to reminding taxpayers, “Don’t count on it!”

Refunds on returns claiming the Earned Income Tax Credit or the Additional Child Tax Credit, for instance, cannot by law be issued before mid-February. More broadly, precautions instituted by the IRS and its Security Summit partners to combat tax-related identity theft may delay refunds.

The potential for delays – and the fact that TCJA-related changes may lead to taxpayers getting less of a refund than they expected – make it important that taxpayers not rely on getting their refund by a certain date so they can make major purchases or pay debts, bills and the like.

Keep an eye out for the new 1040

The current 1040, 1040-A and 1040-EZ are all being replaced by a single, shorter 1040 this year, which can be supplemented by up to six extra schedules.

Those who file their own taxes electronically will need to validate their electronic return with their prior-year AGI, as noted above) or their prior-year Self-Select PIN. (Their AGI would be on Line 37 of last year’s 1040, Line 21 of the 1040-A and Line 4 of the 1040-EZ.)

Double-check ITINs

An Individual Taxpayer Identification Number is required required for certain taxpayers who don’t have a Social Security number, but unlike SSNs, they expire -- and using an expired ITIN can cause major processing delays.

ITINs expire if they haven’t been used in the past three tax years, and currently, those with middle digits 70, 71, 72, 78, 79 and 80 need to be renewed by the end of 2018. Taxpayers should use a Form W-7 to renew, and the IRS strongly recommends submitting an accurate form with valid ID requirements.

Don’t give up on year-end planning

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It’s not Dec. 31 yet, so while it’s time to start thinking about the filing process, it’s not too late for some last-minute adjustments. There are plenty of collections of suggestions for year-end strategies; here are just a couple.

To start, don’t forget the usual blocking and tackling in areas like tax-loss harvesting and maximizing contributions to 401(k) plans and other retirement and savings accounts (see “Tax Strategy: New opportunities for year-end tax planning”).

And then there are plenty of parts of the TCJA to dig into, like planning around the new standard deduction (see “5 top tax reform opportunities for individuals”).