Friday, January 25, 2019

What You Need to Know This Tax Season

There have been significant changes to the laws around taxes since you last filed in 2018, so you may have a few questions this April. We wanted to share some details around what to expect when filing your tax return this year to help ease your mind as you prepare for what can be a stressful time of year. Read on for key dates along with helpful tips for filing accurately and safely.

Timely information

Before reading our tips for filing this year, take note of a few important dates and timeframes for tax season.

  • Tax Day - The last day to file your 2018 tax return is Monday, April 15. This is also the last day that you can file an extension with the IRS.
  • Receiving your documents - Your tax documents are legally required to be sent to you by early February. Depending on your type of employment (full-time, freelancer, business owner) and investments, there are various forms and statements you will need to gather.
  • Tracking your refund - Your tax refund should arrive within 21 days of filing (if you opt to receive it through direct deposit). It’s possible you could receive your refund even faster. The IRS has a return-tracking service that you can check as early as 24 hours after you file your return online or four weeks after mailing your return.
  • Saving old returns - It’s recommended to save copies of your old tax returns for three years at minimum. This is equal to the typical time period the IRS would review if you were to be audited.

Tips for filing

Creating a system for organizing your tax documents is a great way to reduce stress around tax time. Try keeping a designated folder (whether digital or physical) for documents like a W-2 or 1099 (for employment), a 1095 (for health insurance) or a 1098 (if you own a piece of property). Keep supporting documents like medical receipts or donation acknowledgements from a charity in this folder as well.

Many life events can affect your tax situation – for example, getting married, purchasing a home or growing a family. When these events occur, it’s important to consider how you will need to adjust your withholdings for your tax filing. The Tax Cuts and Jobs Act enacted in December 2017 nearly doubled standard deductions and changed several itemized deductions, which could also affect your deduction choices. Changes were additionally made to withholding tables and tax brackets, so it’s a good idea to review your W-4 tax-withholding form annually and make updates as needed.

While the tax code can seem complicated, take a close look at your needs during tax season before hiring an accountant. A simple, free tax preparation service might suffice if your situation is straightforward. Consider filing electronically and selecting direct deposit for your refund method. It’s the fastest method according to the IRS, and it’s easy and secure.1 If your filing will be more complex than the typical worker (perhaps you own a rental property or have a freelance business), seek a professional’s help to get things done properly and on time.

Avoiding tax scams

Because of the amount of personal information and money involved in filing taxes, scammers can be very active during tax season. Identity theft via a stolen Social Security number is a serious scam to watch out for, but it isn’t the only one. Taxpayers should also be on the lookout for phone calls from criminals impersonating IRS agents, phishing attacks using fake emails or websites, and unscrupulous return preparers.

Spotting a scam can be tricky, but they typically involve pressure to act quickly so you don’t have a chance to think before taking action. Scammers often request payment through wire transfer, a prepaid debit card, or another non-traditional method that is untraceable and non-reversible. The IRS will never ask for credit or debit card numbers over the phone and generally initiates contact with taxpayers by mail, so be wary of callers purporting to be the IRS if you haven’t first received a bill in the mail.

Be cautious about giving your information out, especially over the phone or through email, and if you’re suspicious that the request might be a scam, hang up or refrain from clicking on a link. File your taxes as early as possible to limit the opportunities for a scammer to file a fake return with your information.

Additionally, the sooner you file, the sooner you’ll receive your refund and leave the challenges of tax season behind you.

OneWest Bank does not provide investment or legal advice. Please consult with a financial planner to determine the appropriate investment strategies.

1 IRS Refunds: Get Your Refund Faster. Tell IRS to Direct Deposit your Refund to One, Two, or Three Accounts.