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The main purpose of our newsletters has always been to keep you up-to-date with any news of interest from the IRS and the Treasury Department. 2018 promises to be an important and challenging year in this respect. Here are a few announcements for January this far.
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The IRS has recently announced that the nation’s tax season will begin Monday, Jan. 29, 2018 and reminded taxpayers claiming certain tax credits that refunds won’t be available before late February.
Many software companies and tax professionals will be accepting tax returns before Jan. 29 and then will submit the returns when IRS systems open. Although the IRS will begin accepting both electronic and paper tax returns Jan. 29, paper returns will begin processing later in mid-February as system updates continue. The IRS strongly encourages people to file their tax returns electronically for faster refunds.
The Jan. 29 opening date was set to ensure the security and readiness of key tax processing systems in advance of the opening and to assess the potential impact of tax legislation on 2017 tax returns.
As mentioned in previous newsletters, the IRS cannot issue refunds claiming the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) before mid- February. While the IRS will process those returns when received, it cannot issue related refunds before mid-February. The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting on Feb. 27, 2018, if they chose direct deposit and there are no other issues with the tax return.
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The filing deadline to submit 2017 tax returns is Tuesday, April 17, 2018, rather than the traditional April 15 date. In 2018, April 15 falls on a Sunday, and this would usually move the filing deadline to the following Monday – April 16. However, Emancipation Day – a legal holiday in the District of Columbia – will be observed on that Monday, which pushes the nation’s filing deadline to Tuesday, April 17, 2018. Under the tax law, legal holidays in the District of Columbia affect the filing deadline across the nation.
This month, the IRS will begin implementation of new procedures affecting individuals with “seriously delinquent tax debts”. These new procedures implement provisions of the Fixing America’s Surface Transportation (FAST) Act, signed into law in December 2015.
The FAST Act requires the IRS to notify the State Department of taxpayers the IRS has certified as owing a seriously delinquent tax debt. The FAST Act also requires the State Department to deny their passport application or deny renewal of their passport. In some cases, the State Department may revoke their passport.
Taxpayers affected by this law are those with a seriously delinquent tax debt. A taxpayer with a seriously delinquent tax debt is generally someone who owes the IRS more than $51,000 in back taxes, penalties and interest for which the IRS has filed a Notice of Federal Tax Lien and the period to challenge it has expired or the IRS has issued a levy.
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| There are several ways taxpayers can avoid having the IRS notify the State Department of their seriously delinquent tax debt. They include the following: |
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- Paying the tax debt in full,
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- Paying the tax debt timely under an approved installment agreement,
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- Paying the tax debt timely under an accepted offer in compromise,
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- Paying the tax debt timely under the terms of a settlement agreement with the Department of Justice,
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- Having requested or have a pending collection due process appeal with a levy, or
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- Having collection suspended because a taxpayer has made an innocent spouse election or requested innocent spouse relief.
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| A passport won’t be at risk under this program for any taxpayer: |
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Who is in bankruptcy; |
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Who is identified by the IRS as a victim of tax-related identity theft; |
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Whose account the IRS has determined is currently not collectible due to hardship; |
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Who is located with in a federally declared disaster area; |
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Who has a request pending with the IRS for an installment agreement;
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Who has a pending offer in compromise with the IRS; |
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Who has an IRS accepted adjustment that will satisfy the debt in full. |
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For taxpayers serving in a combat zone who owe a seriously delinquent tax debt, the IRS postpones notifying the State Department and the individual’s passport is not subject to denial during this time.
In general, taxpayers behind on their tax obligations should come forward and pay what they owe or enter into a payment plan with the IRS. Frequently, taxpayers qualify for one of several relief programs, including the following:
They can request a payment agreement with the IRS by filing Form 9465. This form can be downloaded from IRS.gov site and mailed along with a tax return, bill or notice. Some taxpayers can use the online payment agreement to set up a monthly payment agreement for up to 72 months.
Some financially distressed taxpayers may qualify for an offer in compromise. This is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. The IRS looks at the taxpayer’s income and assets to determine the taxpayer’s ability to pay.
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The new tax reform bill signed into law on December 22 of last year brings along numerous changes both for individuals and businesses effective 2018. We are now looking forward to the implementation of these changes, as well as additional guidance from the Treasury Department and specifics of the provisions’ implementation from the IRS.
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The IRS released Notice 1036, which updates the income-tax withholding tables for 2018 reflecting changes made by the tax reform legislation enacted last month. This is the first in a series of steps that IRS will take to help improve the accuracy of withholding following major changes made by the new tax law.
The updated withholding information, posted Jan. 11 on IRS.gov, shows the new rates for employers to use during 2018. Employers should begin using the 2018 withholding tables as soon as possible, but not later than Feb. 15, 2018. They should continue to use the 2017 withholding tables until implementing the 2018 withholding tables.
Many employees will begin to see increases in their paychecks to reflect the new law in February. The time it will take for employees to see the changes in their paychecks will vary depending on how quickly the new tables are implemented by their employers and how often they are paid — generally weekly, biweekly or monthly.
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The new withholding tables are designed to work with the Forms W-4 that workers have already filed with their employers to claim withholding allowances. This will minimize burden on taxpayers and employers. Employees do not have to do anything at this time.
The new law makes a number of changes for 2018 that affect individual taxpayers. The new tables reflect the increase in the standard deduction, repeal of personal exemptions and changes in tax rates and brackets.
For people with simpler tax situations, the new tables are designed to produce the correct amount of tax withholding. The revisions are also aimed at avoiding over- and under-withholding of tax as much as possible.
To help people determine their withholding, the IRS is revising the withholding tax calculator on IRS.gov. The IRS anticipates this calculator should be available by the end of February. Taxpayers are encouraged to use the calculator to adjust their withholding once it is released.
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The revision of Form W-4 and the revised calculator will reflect additional changes in the new law, such as changes in available itemized deductions, increases in the child tax credit, the new dependent credit and repeal of dependent exemptions.
The calculator and the new Form W-4 can be used by employees who wish to update their withholding in response to the new law or changes in their personal circumstances in 2018, and by workers starting a new job. Until a new Form W-4 is issued, employees and employers should continue to use the 2017 Form W-4.
For 2019, the IRS anticipates making further changes involving withholding. The IRS will work with the business and payroll community to encourage workers to file new Forms W-4 next year and share information on changes in the new tax law that impact withholding. |
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| These are just outlines of what lies ahead. Help from a tax professional at this point is not only advisable, but necessary to keep up with all the changes and counsel you on the best options for your particular circumstances. |
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