Courtesy of H&R Block
With five weeks remaining until the April 18 tax filing deadline, new tax laws and regulations have already impacted millions of taxpayers. Refunds distributed are down more than $15 billion compared to this time last year, due in large part to the delays for returns claiming the earned income tax credit or the additional child tax credit.
Taxpayers also face increased penalties for being without health insurance, new rules about when they must have a taxpayer identification number like a SSN or ITIN and changing guidance from the IRS about the Affordable Care Act and higher education expenses.
That’s on top of the complications taxpayers face every year, like the risk of tax identity theft and the complexity that comes from participating in the sharing economy or living and working in multiple states.
Taxpayers’ anxiety and confusion around these issues are showing up in the following top questions tax prep giant H&R Block has received this year from among its 6.4 million assisted clients and another 3.9 million DIY clients:
1. Where’s my refund?
Although the IRS was required to hold some refunds until February 15, early tax filers who claimed the earned income tax credit (EITC) or the additional child tax credit (ACTC) should have received their refunds by the last week of February.
The IRS issues more than 90 percent of refunds in less than 21 days, but taxpayers may check the IRS “Where’s My Refund” tool for an expected tax refund date. Taxpayers will need to enter their: Social Security Number, filing status and exact refund amount shown on their return.
To check the status of their state refund, taxpayers can locate their state’s lookup tool.
2. Has the Affordable Care Act (ACA) been repealed?
Do I need a health insurance Form 1095?
Do I need to pay a penalty if I didn’t have insurance?
All ACA legislative provisions are still in force and taxpayers are required to follow the law. However, to accommodate recent direction from the IRS, H&R Block deployed changes across its assisted and DIY tax preparation platforms March 1 to allow e-filing of returns where a taxpayer is unable or unwilling to provide healthcare coverage information at the time the return is prepared.
H&R Block tax professionals will educate clients on the potential ramifications of not including health insurance coverage information.
Taxpayers who do not comply may receive a letter from the IRS and have any refund delayed 45-60 days until they provide coverage information or complete and file a reconciliation.
3. What number do I use from my 1098- T when I claim education-related tax benefits?
Students (or their parents) claiming tax benefits related to education can only use expenses they paid in 2016. However, some institutions will report expenses billed in 2016, which means taxpayers could be left with a discrepancy and will need to organize additional paperwork to substantiate their claim on the tax return.
4. Why do I have a deadline for getting a taxpayer identification number? The Protecting Americans from Tax Hikes (PATH) Act implemented new rules about eligibility for the child tax credit (CTC), American opportunity credit (AOC) and the earned income tax credit (EITC). Taxpayers and qualifying children now must have a valid taxpayer identification number by the due date of the return to claim the CTC or AOC. Taxpayers must have an SSN eligible for work by the due date of the return to claim the EITC. Previously, taxpayers could file late or amended returns to claim credits after getting a valid taxpayer identification number.
5. What am I supposed to do with 1099 income?
Amounts reported in box 7 of Form 1099- MISC reflect the income earned working as an independent contractor. Taxpayers need to report all this income on Schedule C of their federal income tax return. The IRS also receives a copy of any 1099 forms taxpayers receive and will check that information against the tax return to make sure the taxpayer reports all their income.
All income earned through a business, as an independent contractor or from informal side jobs, is self-employment income, which is fully taxable and must be reported on Form 1040, Schedule C. If net profit exceeds $400 for the year, taxpayers also need to prepare Form 1040, Schedule SE, for self-employment taxes.
6. Why do I have to pay taxes or file a tax return in more than one state?
Taxpayers who reside in one state and work in another may have their income taxed in both states and may need to file two state returns. This is also the case for taxpayers who move during the year – they may be a resident, part-year resident or non-resident in more than one state.
In some cases, it is possible for a taxpayer to be a resident of more than one state.
Many states will give a tax credit for taxes paid to another state, so it is important to prepare state returns in the right order to maximize the tax benefit.
For more taxpayer questions and answers, visit the H&R Block Community or Get Answers.