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Get Ready for Taxes, part 2 Reiteration: What to do before the tax year ends Dec. 31

December Deadline

The Internal Revenue Service reminds taxpayers there are things they should do now to get ready for the tax-filing season ahead.

Charitable Contributions
For most taxpayers, Dec. 31 is the last day to take actions that will impact their 2019 tax return. For example, those who plan to itemize deductions should know that charitable contributions are deductible in the year made. Donations charged to a credit card before the end of 2019 count for the 2019 tax year, even if the bill isn’t paid until 2020. Checks to a charity count for 2019 if they are mailed by the last day of the year.

Retirement Plans
Taxpayers who are over age 70 ½ are generally required to take distributions from their individual retirement accounts and workplace retirement plans by the end of 2019. However, a special rule allows those who reached 70 ½ in 2019 to wait until April 1, 2020, to receive them.

Most workplace retirement account contributions should be made by the end of the year, but taxpayers can make 2019 IRA contributions until April 15, 2020. For 2019, the basic limit for 401(k) contributions is $19,000, plus another $6,000 for those who are at least age 50.

For 2019, total contributions to all traditional and Roth IRAs cannot exceed $6,000, or for taxpayers age 50 and older, $7,000. Taxpayers should check IRS.gov for more information about contribution limits, as well as cost-of-living adjustments affecting pension plans and other retirement-related items for tax year 2019.

Some taxpayers may be eligible for the Retirement Savings Contributions Credit, also known as the Saver’s Credit. The income limit is $64,000 for married couples filing jointly, $48,000 for heads of household, and $32,000 for singles and married individuals filing separately for 2019.

Refunds
The vast majority of taxpayers get their refunds faster by filing electronically and using direct deposit. It is simple, safe and secure. This is the same electronic transfer system used to deposit nearly 98% of all Social Security and Veterans Affairs benefits into millions of accounts.

Just as each tax return is unique and individual, so is each taxpayer’s refund. Here are a few things taxpayers should keep in mind if they are waiting on their refund but hear or see on social media that other taxpayers have already received theirs.

Different factors can affect the timing of a refund. Even though the IRS issues most refunds in less than 21 days, it’s possible a particular taxpayer’s refund may take longer. Some tax returns require additional review and take longer to process than others. It may be necessary when a return has errors, is incomplete or is affected by identity theft or fraud. The IRS will contact taxpayers by mail when more information is needed to process a return.

By law, the IRS cannot issue refunds to people claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before mid-February. The law requires the IRS to hold the entire refund, including the portion not associated with the credits. This helps ensure taxpayers receive the refund they’re due by giving the IRS more time to detect and prevent fraud.

Taxpayers should not count on getting a refund by a certain date, especially when planning major purchases or paying other financial obligations.

Update address
Taxpayers who moved during 2019 should tell the US Postal Service, employers and the IRS. Notify the IRS by mailing IRS Form 8822, Change of Address, to the address listed on the form’s instructions. Taxpayers who purchase health insurance through the Health Insurance Marketplace should also notify the Marketplace when they move out of the area covered by their current plan.

For name changes due to marriage or divorce, notify the Social Security Administration so the new name will match IRS and SSA records. Also notify the SSA if a dependent’s name changed. A mismatch between the name shown on a tax return and SSA records often causes refund delays.

ITINs
Taxpayers with expiring Individual Taxpayer Identification Numbers can get their ITINs renewed more quickly and avoid refund delays next year by submitting their renewal application soon.

An ITIN is a tax ID number used by any taxpayer who doesn’t qualify to get a Social Security number. Any ITIN with middle digits 83, 84, 85, 86 or 87 will expire at the end of this year. In addition, any ITIN not used on a tax return in the past three years will expire. ITINs with middle digits 70 through 82 that expired in 2016, 2017 or 2018 can also be renewed.

Affected ITIN holders can avoid delays by starting the renewal process now. Those who fail to renew before filing a return could face a delayed refund and may be ineligible for some important tax credits. More information, including answers to frequently asked questions, is available on IRS.gov/ITIN.

Recordkeeping
Keeping copies of tax returns is important. Taxpayers may need a copy of their 2018 return to make it easier to fill out a 2019 return. Anyone using a software product for the first time may need the Adjusted Gross Income (AGI) amount shown on Line 7 of their 2018 return to file their 2019 return electronically.
 
Taxpayers can also visit View Your Tax Account on IRS.gov. Anyone using the tool must verify their identity. Taxpayers can learn more about that process and electronically signing a return at Validating Your Electronically Filed Tax Return.

Connect with the IRS
The IRS uses traditional and social media tools — available in English and other languages — to share the latest information on tax changes, scam alerts, initiatives, products and services.  

The IRS uses several social media tools including:

  • Instagram: The IRS Instagram account will share taxpayer-friendly information on a variety of topics to help people get ready for tax season.
  • YouTube: The IRS offers video tax tips in English, Spanish and American Sign Language.
  • Twitter: Taxpayers can follow @IRSnews for tax-related announcements and tips. @IRStaxpros tweets news and guidance for tax professionals. Tweets from @IRSenEspanol have and the latest tax information in Spanish. @IRSTaxSecurity tweets tax scam alerts.
  • Facebook: News and information for taxpayers and tax return preparers.
  • LinkedIn: The IRS shares agency updates and job opportunities.

The IRS also has its own app, IRS2Go. Taxpayers can use this free mobile app to check their refund status, pay taxes, find free tax help, watch IRS YouTube videos and get IRS tax tips by email. Like Instagram, the IRS2Go app is available from the Google Play Store for Android devices, or from the Apple App Store for Apple devices. IRS2Go is available in both English and Spanish.

The IRS has a special page on IRS.gov with steps to take now for the 2020 tax filing season.

Get ready for taxes: What to do before the tax year ends Dec. 31

Tax year End

As tax filing season approaches, taxpayers should remember there are things they can do before the end of the year. Doing these will help people get ready for the upcoming tax filing season.

Here are a few things taxpayers still have time to do this year:

Donate to charity
For those who plan to itemize deductions, there is still time to make a 2019 donation. Taxpayers who itemized in the past should remember that the standard deduction has increased. This may limit or eliminate the itemized deductions for many taxpayers.

Report an address change
Taxpayers who moved should notify the IRS of their new address. They should also remember to notify the Social Security Administration of any name change.

Renew expiring ITINs
Certain individual taxpayer identification numbers expire at the end of this year. Taxpayers can visit the ITIN page on IRS.gov for more information on which numbers need renewal.
 
Connect with the IRS
Taxpayers can use social media to get the latest tax and filing tips from the IRS. The IRS shares information on things like tax changes, scam alerts, initiatives, tax products and taxpayer services. These social media tools are available in different languages, including English, Spanish and American Sign Language.
 
Find information about retirement plans
IRS.gov has end-of-year find tax information about retirement plans. This includes resources for individuals about retirement planning, contributions and withdrawals. Taxpayers who are 70½ and over can still take a required minimum distribution from traditional IRA, SIMPLE IRA, SEP IRA, or retirement plan accounts. Taxpayers who reached 70½ in 2019 can wait until April 1, 2020, to receive their first required minimum distribution.

Contribute salary deferral
Taxpayers can make a deferral to a retirement plan. This helps maximize the tax credit available for eligible contributions. Taxpayers should make sure their total salary deferral contributions do not exceed the limit for 2019.

Think about tax refunds
Taxpayers should be careful not to expect getting a refund by a certain date. This is especially true for taxpayers who plan to use their refund when making major purchases or paying bills. Just as each tax return is unique and individual, so is each taxpayer’s refund. Taxpayers can take steps now to make sure the IRS can process their return next year.


More information:
Retirement Plan and IRA Required Minimum Distributions FAQs
About Schedule A, Form 1040, Itemized Deductions
Tax Topic No. 500 Itemized Deductions
Interactive Tax Assistant

Lowering AGI this year can help taxpayers when they file next year

Adjusted Gross Income

A taxpayer’s adjusted gross income is one factor that determines how much tax they owe. Taxpayers who plan today can  lower their AGI.

This tip is one in a series about tax planning. These tips focus on steps taxpayers can take now to help them down the road.

Here are a couple things taxpayers can do now to lower their AGI:

Know how adjusted gross income affects taxes

  • A taxpayer’s AGI and tax rate are important factors in figuring their taxes. AGI is their income from all sources minus any adjustments or deductions to their income. Generally, the higher the AGI, the higher their tax rate, and the more tax they pay.
  • Tax planning can include making changes during the year that  can lower a taxpayer’s AGI. The taxpayer could:
    • Contribute to a Health Savings Account
    • Claim educator expenses if they’re a qualifying educator
    • Pay student loan interest

A full list is on Schedule 1 of Form 1040.

Save for retirement

  • Retirement savings can also lower AGI.
    • Contributing money to a retirement plan at work like a 401(k) plan can reduce a taxpayer’s AGI.
    • Investing in a traditional IRA plan is another way to save for retirement and lower AGI.
    • Self-employed SEP, SIMPLE, and qualified plans are also retirement options that can lower AGI.

Seniors who turned 70½ last year must start receiving retirement plan payments by April 1

Tax Time Guide: Seniors who turned 70½ last year must start receiving retirement plan payments by April 1

The Internal Revenue Service today reminded taxpayers that, in most cases, Monday, April 1, 2019, is the date by which persons who turned age 70½ during 2018 must begin receiving payments from Individual Retirement Accounts (IRAs) and workplace retirement plans.

This news release is part of a series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional help is available in Publication 17, Your Federal Income Tax, and the tax reform information page.

Two payments in the same year

The payments, called required minimum distributions (RMDs), are normally made by the end of the year. Those persons who reached age 70½ during 2018 are covered by a special rule, however, that allows first-year recipients of these payments to wait until as late as April 1, 2019, to get the first of their RMDs. The April 1 RMD deadline only applies to the required distribution for the first year. For all following years, including the year in which recipients were paid the first RMD by April 1, the RMD must be made by Dec. 31.

A taxpayer who turned 70½ in 2018 (born July 1, 1947, to June 30, 1948) and receives the first required distribution (for 2018) on April 1, 2019, for example, must still receive the second RMD by Dec. 31, 2019.  To avoid having both amounts included in their income for the same year, the taxpayer can make their first withdrawal by Dec. 31 of the year they turn 70½ instead of waiting until April 1 of the following year.

Types of retirement plans requiring RMDs

The required distribution rules apply to owners of traditional, Simplified Employee Pension (SEP) and Savings Incentive Match Plans for Employees (SIMPLE) IRAs but not Roth IRAs while the original owner is alive. They also apply to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans.

An IRA trustee must either report the amount of the RMD to the IRA owner or offer to calculate it for the owner. Often, the trustee shows the RMD amount on Form 5498 in Box 12b. For a 2018 RMD, this amount is on the 2017 Form 5498 normally issued to the owner during January 2018.

Some can delay RMDs

Though the April 1 deadline is mandatory for all owners of traditional IRAs and most participants in workplace retirement plans, some people with workplace plans can wait longer to receive their RMD. Employees who are still working usually can, if their plan allows, wait until April 1 of the year after they retire to start receiving these distributions. See Tax on Excess Accumulation in Publication 575. Employees of public schools and certain tax-exempt organizations with 403(b) plan accruals before 1987 should check with their employer, plan administrator or provider to see how to treat these accruals.

IRS online tools and publications can help

Many answers to questions about RMDs can be found in a special frequently asked questions section at IRS.gov. Most taxpayers use Table III (Uniform Lifetime) to figure their RMD. For a taxpayer who reached age 70½ in 2018 and turned 71 before the end of the year, for example, the first required distribution would be based on a distribution period of 26.5 years. A separate table, Table II, applies to a taxpayer married to a spouse who is more than 10 years younger and is the taxpayer’s only beneficiary. Both tables can be found in the appendices to Publication 590-B.

Taxpayers can find answers to questions, forms and instructions and easy-to-use tools online at IRS.gov. They can use these resources to get help when it’s needed, at home, at work or on the go.

Join your employer’s retirement plan in 2018

By participating in your employer-sponsored retirement plan, you can:

• decrease your taxable income by making pre-tax salary deferral contributions if allowed by the plan, and

• increase your retirement savings. Participate in the plan Join the plan as soon as you can.

Many retirement plans have quarterly or semi-annual entry dates. Contact your employer to find out when you can participate and consider joining the plan on the next entry date.

Contribute to the plan Once you have joined your employer’s retirement plan, review the amount you are contributing to the plan. The maximum annual salary deferral contributions allowed for 2018 are:

• $18,500 to 401(k) or 403(b) plans

• $12,500 to SIMPLE plans If you will be 50 or older by the end of 2018, your retirement plan may allow you to make additional contributions, known as “catch-up contributions.”

For 2018, you can make catch-up contributions of:

• $6,000 to 401(k) or 403(b) plans

• $3,000 to SIMPLE plans Get credit for saving You may be able to take a tax credit for making eligible contributions to your employer sponsored retirement plan and IRA. The amount of the credit you can get is based on the contributions you make and your credit rate. Your credit rate can be as low as 10 percent or as high as 50 percent, depending on your income and your filing status. So, join your employer’s retirement plan as soon as you can and start saving for your retirement.

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