Year-end Tax Tips From IRS to Help You Prepare for Busy Seasonby
Yes, accountants, it’s that time of the year with the holidays followed by the cold, dark days of… busy season.
But the IRS has weighed in with helpful tax-filing hints that clients should heed to make everyone’s lives, um, somewhat pleasant.
Here’s a snapshot of the key takeaways from the IRS recommendations. It might be wise to let taxpayers know that doing this right the first time will avoid refund delays or the need to file an amended return.
Gather the Paperwork
Taxpayers should have Forms W-2 from employers, Forms 1099 from banks and other payers, and Forms 1095-A from the Affordable Care Act health insurance marketplace for those people who will claim a premium tax credit. The forms usually start arriving in January.
Clients also should keep their 2016 tax return and supporting documents for at least three years. If they use a software program, they may need their Adjusted Gross Income (AGI) from their 2016 return.
Re-up Expiring Individual Taxpayer Identification Numbers
Any ITIN that hasn’t been used on a tax return during the last three years will expire Dec. 31. That also goes for ITINs with middle digits of 70, 71, 72 or 80.
ITINs with middle digits of 78 or 79 expired Dec. 31, 2016, but can still be renewed.
Taxpayers whose ITINs are expiring can renew it by using Form W-7. Once that’s filed, it takes about two months to get an ITIN assignment from the IRS. But taxpayers who wait into busy season or who send it from abroad will wait even longer.
Find out more about ITINs here.
Those All-important Refunds
The IRS legally cannot issue refunds before mid-February to taxpayers who claim the Earned Income Tax Credit or Additional Child Tax Credit – and the agency has to hold the entire refund. The IRS expects the earliest refunds that involve these credits to be available beginning Feb. 27 if direct deposit is used and there aren’t any other issues with the tax return.
That’s a legal change that became effective earlier this year. It helps give the IRS more time to detect and prevent fraud.
Still, the IRS makes note that it pays out more than nine out of 10 refunds in less than three weeks.
How to get Those Refunds Even Faster
Despite the IRS’ continued problems with electronic filings and hackers, the agency still says that the easiest way to avoid problems is to electronically file returns – and says that about 90 percent of returns are filed that way.
Refunds arrive even faster if taxpayers use direct deposits. Again, the IRS reassures: “There’s no reason to worry about a lost, stolen or undeliverable refund check. This is the same electronic transfer system now used to deposit nearly 98 percent of all Social Security and Veterans Affairs benefits. Nearly four out of five federal tax refunds are direct deposited.”
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.