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The new tax law changes won't be difficult to navigate if you're filing electronically.
- $4, the last day to file your 2018 tax return, is Monday, April 15.
- It's the first tax season under President Donald Trump's $4, the most significant overhaul of the US tax code in 30 years.
- According to the IRS, $4 for the first time under the new law should be "seamless" for the 90% of Americans who file electronically.
- While some taxpayers are projected to get a smaller refund or owe money to the IRS, it's not an indication that they're worse off financially, according to one expert.
The first tax season under President Trump's new tax law is underway.
The IRS started accepting tax returns on Monday, January 28, which means you can file as soon as your receive a W-2 form (or 1099 form if you're a freelancer) from every employer you had in 2018.
$4 expects nearly 150 million individual tax returns to be filed this year. Despite a lapse in funding and a reduced workforce caused by the $4 that ended, at least temporarily, just before the official start of tax season, the IRS says it will process returns and pay out refunds on time.
The IRS also doesn't anticipate Americans will have trouble filing their taxes for the first time under the new tax law. The biggest change to the filing process is that Forms 1040, 1040A and 1040-EZ have been combined into one form, which all individual taxpayers must use to file their federal return.
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For taxpayers who use tax software to $4 - the method recommended by the IRS, as opposed to the traditional pen-and-paper method - this change will hardly be noticeable.
"Since nearly 90% of taxpayers now use tax software, the IRS expects the change to Form 1040 and its schedules to be seamless for those who e-file," $4.
You can use the $4 to find $4. If your income was less than $66,000 in 2018, you can file your federal tax return for free; the IRS lists 12 different tax preparers, including $4 and $4. Some companies also offer free tax filing for state returns, while others charge a fee.
"For taxpayers who are using computer software, the actual entry of information should be similar to last year," Mike Savage, CEO of $4, told Business Insider.
"Although there is an increase in the standard deduction and certain itemized deductions have been reduced, the software can still determine which option is best," Savage said. "A number of states have decided not to follow all of the federal changes. In particular, the deduction of state and local taxes is limited to $10,000 on the federal return, but some states will still allow a full deduction. As a result, the use of a professional tax preparer or tax software will become essential."
If you're preparing your tax return by hand, the tax code changes are best navigated with the help of a tax professional.
Your tax refund may be smaller, but there's no reason to panic
Perhaps the biggest concern among filers this year is the size of their $4.
"Depending on a filer's tax situation, they may not get as large of a refund this year as they're used to if they didn't adjust their withholdings in 2018. That said, they shouldn't immediately be alarmed if that's the case," Mark Jaeger, director of tax development at $4, told Business Insider.
"Many filers received a boost in their paychecks throughout 2018; that's where the remaining amount of their refund went. Instead of waiting to receive their money as a tax refund, they received it all year long," Jaeger said. The new tax law instituted new guidelines in early 2018 on how much employers should withhold for taxes from their employees' paychecks, which resulted in $4 for about 90% of Americans, Business Insider's Bob Bryan reported.
According to $4, a Treasury Department analysis $4 estimated that compared with last year, about 4 million fewer filers would receive refunds this year, while about 4 million more filers would have a balance to pay on their taxes because of the new withholding system.
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"The good news is the IRS just announced they are $4 for any taxpayers whose 2018 federal income tax withholding and estimated tax payments fell unexpectedly short of their total tax liability for the year," Jaeger said. "That means if you didn't pay at least 85% of your tax liability throughout the year, you won't have to pay the late payment penalty that's typically handed down to those taxpayers."
Meanwhile, a team of $4 analysts projected that most married filers with two children would see a pretty sizeable $4 for 2018 compared with 2017, especially those making under $40,000 a year and those making $125,000 to $400,000.
But at the end of the day, receiving a big refund is neither good nor bad, Jaeger said, adding that taxpayers can either reduce or increase withholdings - the amount of money an employer withholds from your paycheck to cover your tax liability - to determine the size of their refund.
"Just because you receive a small refund, doesn't mean you didn't get everything back you were owed or that you're worse off financially. It most likely means you paid the right amount of federal taxes you owed during the year and didn't overpay," Jaeger said.
"Some individuals like receiving a larger refund because they use it as a savings account. It's a way for them to save a significant chunk of money throughout the year," he said. "For some, that's a perfectly fine strategy as long as you can cover all of your other expenses throughout the year."