The Tax Cuts and Jobs Act, passed in December 2017, made some broad changes: It introduced new tax brackets, included an expanded child care credit and changed the way itemized deductions are factored in, for example. Unfortunately, 28 percent of Americans don’t understand exactly what’s different, and almost half have no idea how the changes affect their tax bracket.
refunds amounts dropped 8.4 percent and that the Internal Revenue Service is processing returns more slowly, in large part because of the 35-day partial government shutdown.
“The service was slow in its ability to process returns,” says Howard Gleckman, a senior fellow in the Urban-Brookings Tax Policy Center. The IRS, in the first week of tax season, processed four million fewer returns, he says, even though it received two million fewer returns to process.
Given all this, what, if anything, can you do? Experts agree there’s one smart move you can make: File as soon as possible.
Tax filing season, which started on January 28, 2019, runs through Monday, April 15, 2019, for most taxpayers. So you can file ASAP, and that’s what they recommend: “It’s still a benefit to file early,” Gleckman says.
The advantages of filing early
If you’re getting a refund
When you file sooner, you get your money sooner. Not everyone who expects one is getting a refund this year, but if you are, you will get your money in a more timely manner now than you will later in the season when the agency has a higher volume of returns to process.
Additionally, if the IRS continues to operate at a slower pace, there could be more delays, so it’s better to be ahead of the game. “They may get caught up,” Gleckman says, “or it may be that they’re behind the curve for several weeks or maybe even for the whole filing season.”
If that’s the case, “the longer you wait, the more you’re going to get caught up in the back up,” he adds.
If you need to pay
Millions of people may owe money to the IRS this year, according to the Government Accountability Office.
If you’re concerned about your tax liability, it can be helpful to file early, since filing your return gives you a handle on your tax liability as soon as possible. Then you have time to prepare, says Barry Kleiman, a CPA and principal at the tax firm Untracht Early.
“If money is owed,” he says, “the balance does not have to be paid until April 15, even if the return is filed earlier.”
It’s also not a bad idea to consider the worst-case scenario, one in which you have to write an unexpected check to the IRS, says Logan Allec, a CPA and owner of the personal finance blog Money Done Right. Take a close look at your budget now to start looking for ways to save money where you can.
“I’m not saying that people necessarily need to alter their entire lifestyle,” Allec says. Start with the easy stuff: dine in more, or rent a free movie from the library rather than going out.
If you do end up owing the IRS, don’t panic. There are payment plans available if you can’t pay your entire tax bill when you file your return. And the IRS has said it may waive penalties if you’ve paid at least 85 percent of your 2018 tax liability.
Keep in mind that filing an extension will not get you a reprieve. An extension does not extend your time to pay your taxes due, says New York-based CPA Anil Melwani. Instead, you’ll still have to pay about 90 percent of your tax bill by April 15 to safely avoid penalties.
“The tax authorities have no problem giving anyone until Oct. 15 to file their returns, but they do not want to wait that long to receive ‘their’ money,” he says. “This is definitely one of the most confusing things when it comes to income taxes.”
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