Got tax questions? I have the answers.

All of those confusing changes in the TCJA (Tax Cut and Jobs Act) have led to some unexpected outcomes – like teeny, tiny refunds or surprise tax bills.

Plus, the forms that were supposed to be “postcard-simple” are confusing even for the experts.

I’ve been getting a lot of questions this year – and expect I’ll get a lot more. If you have any questions that aren’t answered here, add them to the comments and I’ll answer as soon as I can. You can also contact me here.

Here are the questions I’ve gotten so far:  

Q: I thought I’d be getting a tax cut, so why is my refund so much smaller than I expected?

A: You probably did get a tax cut – it just doesn’t look that way. When the new law took effect, take-home pay (for most people) got a little bigger. Maybe an extra $20 per paycheck, nothing super noticeable. That tiny paycheck bump was like a pre-refund. Because you paid less during the year, your refund amount shrunk. A tough break if you were counting on your normal refund, but that’s what happened.

Q. I heard the standard deduction has changed. What does that mean?

A. For everyone, the standard deduction got bigger. So if you used to itemize deductions, you may not need to bother doing that anymore. And if you never itemized, you can just enjoy the bigger standard deduction. Here’s how the new standard deductions pan out:

  • For single filers – $12,000
  • For head of household filers – $18,000
  • For married couples filing jointly – $24,000

Q.How do I know if I should take the standard deduction or itemize my deductions?

A. If your itemized deductions will be more than your standard deduction, itemize away! Here are the most common itemized deductions that you can still take:

  • Unreimbursed medical expenses greater than 7.5% of your adjusted gross income (AGI).
  • Mortgage interest
  • State and local taxes (SALT) including property taxes and either state and local incomes taxes or sales taxes up to a total of $10,000
  • Charitable donations (cash or stuff)

If you aren’t sure which way will come out better, try running them both. Most DIY tax software will let you compare. And if you pay a tax preparer, they can definitely figure it out for you.

Q. I normally claim my child as a dependent but heard that has changed and now I need to apply for a “child tax credit.” What does this mean and how do I know that I qualify?

A. We used to claim our kids for tax “exemptions,” but those are just gone now. What we do have is a bigger child tax credit, up to $2,000 for each qualifying child.

Here are the basic rules for a qualifying child (click here for the complete rules and exceptions)

  • The child had to be under 17 as of December 31.
  • The child has to have a Social Security number.
  • They have to be your child, stepchild, foster child, brother, sister, grandchild, or other related child.
  • The child didn’t provide more than half of their own support for the year.
  • The child had to live with you for more than half the year. Temporary absences, like a kid away at college that you’re supporting, still count as living with you.
  • The child has to be a U.S. citizen.
  • The child has to qualify as a dependent on your tax return.

Your tax software or your tax preparer know all ins and out of these rules, and will help you figure out if you qualify for the credit.

Q. Are there any changes to how I deduct interest for my mortgage?

A.  If you decide to itemize deductions, you’ll still deduct mortgage interest the same way. The only difference is the amount you’re allowed to deduct.  If you bought your house and got your mortgage after December 15, 2017, you can only deduct interest on up to $750,000 of mortgage debt (that’s down from $1,000,000).

Q. Is it true that my alimony is no longer deductible?

A. Not exactly. If you’ve been making tax-deductible alimony payments, you won’t feel a change. But for divorce agreements signed on or after January 1, 2019, alimony paid won’t be tax deductible.

Q: I own a small business, and was told that things like meals and entertainment are no longer deductible. Is this true?

A: Yes and no. You can’t deduct entertainment expenses at all anymore – that’s done with. Business meals, though, are a different story. They’re still partially deductible, but with more strings attached and hoops to jump through. Basically, you can deduct 50% of legit business meals if…

  • The meal is an ordinary and necessary business expense
  • You or one of your employees has to be there
  • You have the actual receipts
  • You make a note of the business purpose of the meal on the receipt

Like all tax rules, there are special exceptions (like for food critics) and some fully deductible meals (like at a company picnic). You can get the full (and sort of confusing) scoop here.

Q: I heard for single parents, it can be more lucrative to file as “head of household” rather than single. Is this true? And if so, how do I know if I qualify?

A: This is 100% true! If you qualify as head of household (HoH) – and most single moms do – you’ll get a bigger standard deduction and better tax rates. That’s means much a much lower tax bill for you. Here’s how you qualify:

  • You’re single, divorced, or separated.
  • You’ve lived apart from your ex-spouse for at least the last six months of last year.
  • Your kids live with more than half the time (even one extra day counts).
  • You support a qualifying child.
  • You paid more than half of the support for your household.

This year, the IRS is stricter about proof for this tax status, so don’t be surprised if your tax preparer asks some extra questions to make sure you qualify.

Q: Are there websites other than TurboTax where I can file for free?

A: Yes! Your first stop should be the IRS Free File page. If you don’t want to DIY, you can try the Volunteer Income Tax Assistance (VITA) program.

Many offer “free” tax prep software, but most people end up paying for upgrades, e-filing, or state tax returns – so be prepared for that.

Q: Will these federal changes impact my state taxes?

A: No simple answer here: It depends on the state. Most states’ tax laws sort of piggybacked on to the federal law… until now. Some states have updated their rules, others haven’t. Bottom line: In some states, the federal changes will affect your state tax bill… and in some states they won’t.

Q: Should I expect a delay in receiving my tax refund?

A: Nope. The IRS estimates that most tax refunds will be delivered within three weeks of when they process your tax return (24 hours for e-filers; 4 weeks for paper filers). Some returns take longer – like returns with mistakes on them (a mismatch between your return and your W-2, for example). You can check on your refund status at Where’s My Refund? on the IRS website.

Q: I owe a lot in taxes, and I’m not sure I can afford to pay it all at once. What are my options?

A: If you end up owing taxes but can’t pay the full bill at once, don’t worry – there are a lot of ways to handle this. Your choices range from a short-term payment plan to a temporary tax debt time-out. You can find in-depth coverage of each option – including exactly what you need to do – here. The most important thing to do is FILE ON TIME, even if you can’t pay a dime. That way you’ll at least avoid having late filing penalties tacked on to your tax bill.

Be aware: Filing a tax extension gives you more time to file, but not more time to pay. If you file an extension and owe taxes, you have to pay with the extension to avoid penalties and interest.

Q: I heard that the tax reform changed the amount of money withheld from my paycheck. How do I know if I should change my withholdings for this upcoming year? And if I should, how do I know how much to change it by?

A: Most people will need to adjust their withholding to account for the tax law changes. You can figure out how much you need to withhold by doing a Paycheck Checkup on the IRS website. And if your circumstances change at all during the year – or if you just want to make sure your taxes are on track – you can do it again. You can update your withholding status at any time during the year if you need to.

Q:  If I forgot to contribute to my IRA last year, can I still do so and apply that to my taxes before filing? How?

A: IRA contributions for 2018 have to be made by April 15, 2019. Just make sure you indicate that the contribution is for 2018, and it will count for your 2018 tax return (the one you file in 2019). You can contribute $5,500 ($6,500 if you’re at least 50 years old) to your IRA for 2018.

Q: What happens if I miss the filing date?

A: If you miss the filing date, send in your tax return as soon as you can. There are penalties for late filing. Faster is better.

If you’re avoiding filing on time because you owe money to the IRS and can’t afford to pay it all, file on time anyway. And pay as much as you can with the tax return.

Still have questions? Comment below or contact me directly here.