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Taxes
Information to Help You Prepare Your 2018 Federal Tax Return
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On December 22, 2017, the Tax Cuts and Jobs Act (TCJA) went into effect, creating sweeping changes that affect taxpayers across all income levels. This article helps you understand some of the recent tax law changes, provides information on filing your taxes, and answers some of the most common taxpayer questions.

The deadline to file your federal taxes for the 2018 tax year is April 15, 2019 (April 17 if you live in Maine or Massachusetts). Failure to file a tax return or failure to request an extension for time to file your tax return may result in added penalties and interest.

Should I go to a tax preparer?

If your current income is below $55,000, you likely qualify for free tax preparation assistance. There are several programs in New Jersey that will provide free services from a tax professional. One of these programs is the Volunteer Income Tax Assistance (VITA) program. (See Where can I go to get help filing my tax return?.)

How do I choose a tax return preparer?

If you do not qualify for free tax assistance and must pay someone to prepare your tax return, be careful. You are legally responsible for what is on your return, even if it wasn’t prepared by you. While there are many honest and professional tax preparers, some are not well trained or may be fraudulent. Here are some tips to choose a preparer carefully:

  • Only use preparers who sign the returns they prepare and include their Preparer Tax Identification Number (PTIN).
  • Check the person’s qualifications. For example, ask the preparer their educational background, or if they are affiliated with a professional organization.
  • Check the preparer’s history. Make sure they have a license, and check for disciplinary actions with the state board of accountancy for certified public accountants.
  • Avoid preparers whose fees are based on a percentage of your refund.
  • Make sure any refund due is deposited into your bank account, or the check is mailed to you. Do not have all or part of your refund deposited into the preparer’s account.
  • Never sign a blank return. Review the entire return, and make sure all the information is complete before you sign. Do not be afraid to ask questions.
  • Keep a copy of the return for your records.

What is tax-related identity theft?

Tax-related identity theft occurs when someone steals your Social Security number (SSN) and uses it to file a tax return and get a refund. It is very important that you protect your personal information so you don’t become a victim. Following are tips to protect your SSN and other personal information.

Tips to protect your SSN and identifiable information

  • Keep your card and any other document that shows your Social Security number in a safe place; do not routinely carry your card or other documents that contain this number.
  • ONLY share your SSN when absolutely necessary and when you initiate the contact or you are sure you know who is asking and for what purpose.
  • Protect personal financial information at home and on your computer.
  • Check your credit report annually.
  • Protect your personal computers by using firewalls, anti-spam/virus software. Update security patches and change passwords regularly.

Should I consider a refund anticipation loan?

No. This time of year, tax preparation businesses heavily advertise offers to “get your refund early.” These are not instant refunds issued by the IRS. They are loans, secured by your tax refund, and the lender will likely add high fees and interest rates. Some loans are currently being advertised at 35.9% interest rates. The fees and interest will be deducted from your refund, and you won’t get the full amount of the refund you are entitled to.

Do I have to file a return?

Whether you are required to file a tax return depends on your age, filing status, and gross income. The amount of income you can receive before you are required to file a tax return is called a filing threshold. Use the table below to see if you are required to file a federal tax return.


2018 Filing Requirements Chart for Most Taxpayers

IF your filing status is. . .

AND at the end of 2018 
you were. . .

THEN file a return if your gross income was at least. . .

Single

under 65

$12,000

65 or older

$13,600

Married filing jointly

under 65 (both spouses)

$24,000

65 or older (one spouse)

$25,300

65 or older (both spouses)

$26,600

Married filing separately
(see the instructions for Form 1040)

any age

$ 5

Head of household
(see the instructions for Form 1040)

under 65

$18,000

65 or older

$19,600

Qualifying widow(er)
(see the instructions for Form 1040)

under 65

$24,000

65 or older

$25,300

Note: If you were born on January 1, 1954, you are considered to be age 65 at the end of 2018.
More information about filing requirements (from IRS.gov).


Consider filing a return even if you do not have to!

Even if you do not make enough money to have to file a tax return, you should still consider filing one. If you are working, but your income is low, you are probably eligible to get a refund of taxes that were withheld from your paycheck during the year. There are also other tax credits, for which you might be eligible, for example, the Earned Income Tax Credit. See The Earned Income Tax Credit for more information about EITC. A tax refund means that the IRS will be returning money to you. If you don’t file a return, you won’t get money back that you are entitled to.

When do I have to file?

The deadline for filing 2018 tax returns is April 15, 2019.

What if I am unable to file my tax return on time?

If you are unable to file by April 15, 2019, you may file for a six-month extension by completing IRS Form 4868 (from IRS.gov). Extension requests are automatically granted. Submitting this form on or before April 15 gives you until October 15, 2019 to file. Note that this is only an extension of time to file, NOT the time to pay. So, if you are self-employed and make estimated tax payments on a quarterly basis, you should still estimate your tax liability for 2018, and pay any amount due. Failure to do so may result in a penalty. If you do not have the money to pay what you owe, you should still file the request for the extension. You will avoid the late-filing penalty and interest on that penalty.

How do I find out the status of my tax refund?

The Refunds tool (from IRS.gov) allows you to instantly check the status of your refund.

What does filing status mean?

Filing Status is a term used by the IRS to determine your tax filing obligations, standard deductions, and eligibility for certain credits and deductions. It is based mainly upon marital status and family situation. There are five types of filing status: Single, Married Filing Jointly, Married Filing Separately, Head of Household (HOH), and Qualifying Widow(er) with Dependent Child. Note that your marital status on the last day of the year determines your filing status for the entire year. You can choose Single filing status only if you have never been married, or are divorced or legally separated according to state law. To file as Head of Household, you must be considered unmarried and you must have paid more than half the cost of maintaining your household for yourself and a qualifying person. For more information about filing status, see IRS Publication 501: Exemptions, Standard Deductions and Filing Information.

Can I take personal exemptions under the new tax law?

Starting in 2018, personal exemptions have been suspended. This is to last until 2025. A personal exemption is a fixed amount of money that the IRS determines should be excluded from being taxed. Under the new tax law, standard deductions have increased and personal exemptions have been suspended. Deductions are discussed below.

What are deductions?

Deductions are amounts subtracted from your income. Generally, deductions are eligible expenses that taxpayers are allowed to report. You can choose whether to take a standard deduction or to itemize (list) your deductions. You should choose the option that is best for you, or the amount that best offsets your income. A standard deduction is a set, flat amount determined each year by the IRS. Each household can take one standard deduction. When you itemize your deductions, you specify item by item what was spent, such as mortgage interest, medical expenses, state taxes and charitable deductions. The dollar amount of your standard deduction depends on your filing status. The standard deduction chart (below) lists the dollar amount of the standard deduction for the 2018 tax year. These standard deductions have approximately doubled from the previous year. For example, in 2017 if you were single you could claim a deduction of $6,350. Under the new tax law, you can deduct $12,000.


2018 Standard Deduction Chart for Most People*

If your filing status is...

Your standard deduction is:

Single or Married filing separately

$12,000

Married filing jointly or Qualifying widow(er) with dependent child

$24,000

Head of household

$18,000

*Do not use this chart if you were born before January 2, 1954, are blind, or if someone else can claim you (or your spouse if filing jointly) as a dependent. Use Table 7 or 8 instead, which can be found in IRS Publication 501 (from IRS.gov).


What is a tax credit?

Unlike deductions, which reduce the amount of income on which your tax is calculated, tax credits reduce the actual amount of your tax. There are several tax credits available for families, such as the Child Tax Credit, the Credit for Other Dependents, the Child and Dependent Care Credit, and the Earned Income Tax Credit.

The Earned Income Tax Credit (EITC)

This is one of the most valuable credits because it is fully refundable. This means that you will still get money back, even if you did not owe any tax (see table below). The amount of the EITC depends upon income and family size. You must meet the following requirements in order to claim the EITC:

  • Your status cannot be Married Filing Separately.
  • You must have a valid Social Security number for you and your spouse (if filing a joint return) and any qualifying child.
  • You must have earned income. Earned income means you are paid in wages, are self- employed, have farming income, or you receive disability income.

For more information and to see if you qualify, see Use the EITC Assistant (from IRS.gov).

2018 EITC

 
Maximum Income
Single/Head of Household
Maximum Income
Married Filing Jointly

 

Maximum
Credit

 

No qualifying children

$15,270

$20,950

$519

With one qualifying child

$40,320

$46,010

$3,461

With two qualifying children

$45,802

$51,492

$5,716

With three or more qualifying children

$49,194

$54,884

$6,341


Where can I go to get help filing my tax return?

If you are a low-income taxpayer, there are a number of resources to help you file your taxes for free.

IRS Free File Program: This program makes commercial tax preparation software available to low-income taxpayers at no cost. If you had less than $66,000 in adjusted gross income in 2018, these programs will help you complete and return your tax return at no cost. Go to Free File (from IRS.gov). You will need to select the tax software that best suits your needs. Once you choose a preparer, you will leave the IRS website and be taken to the commercial preparer’s site. Based upon your answers to income and family questions, a tax return will be prepared on your behalf and filed electronically. Note, this may not be an option for filing your state tax return, so you may want to consider one of the other in-person tax preparation options listed below.

Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE):  The VITA program generally offers free tax preparation services to people with incomes below $55,000. In addition, the TCE program offers free tax help for all taxpayers, particularly those 60 and older, specializing in questions about pension- and retirement-related issues unique to seniors. VITA and TCE sites are staffed with volunteers trained to prepare returns and can be accessed at libraries, senior centers, and other community centers. To find a VITA or TCE site near you, call 1-800-906-9887 or 211, or visit Free Tax Return Preparation for Qualifying Taxpayers (from IRS.gov).

You should contact the sites as soon as possible to find out how to make an appointment. As the April 15, 2019 deadline approaches, these sites become busier and it may be difficult to secure an appointment.

What should I bring to my VITA or TCE appointment?

Save time by being prepared for your appointment with VITA or TCE. Below is a list of information you should bring with you:

  • Proof of identification (photo ID)
  • Social Security cards for you, your spouse and dependents
  • An Individual Taxpayer Identification Number (An ITIN assignment letter may be substituted for you, your spouse and your dependents if you do not have a Social Security number.)
  • Proof of foreign status, if applying for an ITIN
  • Birth dates for you, your spouse and dependents on the tax return
  • Wage and earning statements (Form W-2, W-2G, 1099-R,1099-Misc) from all employers
  • Interest and dividend statements from banks (Forms 1099)
  • Health Insurance Exemption Certificate, if received
  • A copy of last year’s federal and state returns, if available
  • Proof of bank account routing and account numbers for direct deposit such as a blank check
  • Total paid for daycare provider and the daycare provider’s tax identifying number such as their Social Security number or business Employer Identification Number
  • Forms 1095-A, B and C, Health Coverage Statements
  • Copies of income transcripts from the IRS and the state, if applicable

To file taxes electronically on a married-filing-jointly tax return, both spouses must be present to sign the required forms.

For more information, visit What to Bring to Your Local VITA or TCE Site (from IRS.gov).

Is there still a penalty for not having health insurance?

Yes, the penalty for not having health insurance was still in effect for 2018. If you could afford health insurance in 2018, but chose not to buy it, you may be required to pay a fee called the individual shared responsibility payment. You would owe the fee for any month you, your spouse, or your tax dependents didn’t have qualifying health insurance. There are many exceptions to this requirement, however, which are discussed below.

How much is the penalty for 2018?

The penalty is calculated in two ways. The first way is calculating 2.5% of your household income. The second way is by a penalty of $695 per adult and $347.50 per child under 19. The two are compared, and you will be charged whichever is higher.
However, many people qualify for an exemption from this requirement. If you qualify, you won’t have to pay the fee. Some of the exemptions are as follows:

  • Financial hardship or other circumstances prevented you from getting health insurance.
  • The lowest priced coverage available to you would cost more than 8.05% of your household income.
  • Your income was low enough that you did not have a filing requirement.
  • You lived in a state that did not increase its Medicaid eligibility amounts, and your household income was below 138% of the federal poverty level. Go to Federal Poverty Level (FPL) (from Healthcare.gov) for the federal poverty guideline amounts.
  • You were incarcerated in 2018.

For details and a list of the exemptions, visit Health coverage exemptions, forms & how to apply (from Healthcare.gov).

Other changes in the Tax Cuts and Jobs Act

Again, the Tax Cuts and Jobs Act was passed in December 2017. Following are key changes that took effect in 2018, or will take effect in 2019.

New 1040 form

Starting with tax year 2018, the 1040 form will look different from prior years. It consists of two pages with six new numbered schedules (1-6). The letter schedules, such as A, B, C, D, E, remain. There is no longer a 1040A or 1040EZ. All filers will use the new 1040 form.

Credit for Other Dependents

This credit is new starting in 2018, and can be used for dependents who do not qualify for the Child Tax Credit. For example, a dependent who is over 16 years old, or who does not have a Social Security number, but does have an ITIN number, can qualify as a taxpayer for this credit. The Credit for Other Dependents is $500. It can lower your taxes, but cannot become part of your refund if you do not owe any tax.

State and local tax and property tax deduction

For taxpayers who itemize deductions, the deduction for state and local income tax, and for property tax you paid in 2018, is limited to $10,000 total.

Miscellaneous itemized deductions

Under the Tax Cuts and Jobs Act, certain miscellaneous itemized deductions, which in the past could be deducted if they were more than 2% of the taxpayer’s adjusted gross income, can no longer be deducted (from 2018 through 2025). Examples of these deductions are business expenses you claimed when you were a W-2 employee, tax preparer fees, union dues, etc.

Treatment of alimony payments (2019)

This has been changed significantly under the new tax law. Through 2018, the payor of alimony or maintenance payments deducted these payments from income. The person receiving the alimony would include the payment as income. In 2019, alimony payments are no longer deductible to the payor and they are no longer includable as income for the recipient.

Increase to the Child Tax Credit (CTC)

Starting in 2018, the CTC doubled from $1,000 to $2,000 per qualifying child. Up to $1,400 of the CTC can be received as a refundable credit, meaning it can go toward a tax refund. This benefit phases out if you earn over $200,000 as a single filer and $400,000 filing jointly.

Deduction of mortgage interest

For new home mortgages or refinances taken after December 15, 2017, you can deduct mortgage interest on $750,000 of the loan amount. For mortgages (or refinances) taken on or before December 15, 2017, you can still deduct interest payments on up to $1 million of the loan amount.

Discharge of student loans

Under the old law, student loan debt that was forgiven (or discharged) because of the student’s death or disability would be countable as income. Under the new law, student loan debt forgiven (or discharged) because of the student’s death or disability is not includable as income and is therefore not taxable.​​​

2/11/2019