We sat down with the CEO of Santa Barbara Tax Products Group (a Green Dot company), Brian Schmidt, and asked for his perspective on what has become an interesting tax season.
Green Dot [GD]: Brian, thanks for your time. First off, who is Santa Barbara Tax Products Group?
Brian Schmidt [B]: We are a division of Green Dot that focuses on providing a variety of financial services, including payment processing, loans, and transactional bank products to the tax industry; both taxpayers and tax preparers. Our most popular and well-known product is the Refund Transfer which gives millions of taxpayers the ability to utilize professional tax preparers and do-it-yourself tax software products without having to pay for the services until they have received their refund.
GD: What [did] the government shutdown mean for filing taxes and refunds?
B: The IRS announced that refunds will be provided to taxpayers as scheduled, but as the shutdown [continued] there [were] concerns that IRS staffing levels could delay tax refunds.
What we [did] know is that until the government shutdown [ended], the IRS [would] be operating with a limited staff. Taxpayers contacting the IRS for assistance [could] expect longer hold times.
GD: Will some refunds be delayed even if [when] the shutdown ends?
B: Yes, millions of taxpayers will experience delayed refunds not related to the government shutdown. The PATH Act law passed in 2015 requires the IRS to hold refunds until February 15 for taxpayers filing early and claiming Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC). This gives the IRS more time to match taxpayer information with information provided by employers, helping to reduce identity theft and fraud.
GD: What are the tax law changes that may increase refund amounts for 2019?
B: 2018 was a year of sweeping tax law changes with the passing of the Tax Cuts and Jobs Act (TCJA). IRS Commissioner Chuck Rettig said this past year the IRS implemented, “…the biggest tax law changes the nation has seen in more than 30 years.” Here are a number of changes that may be a positive change for many taxpayers:
- Tax brackets and tax rates have changed – most taxpayers will see a lower tax rate and the bracket changes mean that some taxpayers will fall into a lower tax bracket. See the chart below.
35 percent, for incomes over $204,100 ($408,200 for married couples filing jointly)
32 percent for incomes over $160,725 ($321,450 for married couples filing jointly)
24 percent for incomes over $84,200 ($168,400 for married couples filing jointly)
22 percent for incomes over $39,475 ($78,950 for married couples filing jointly)
12 percent for incomes over $9,700 ($19,400 for married couples filing jointly)
- Bigger standard deduction – the standard deduction has almost doubled to the following amounts:
- $12,000 for single (up from $6,350)
- $18,000 for head of household (up from $9,350)
- $24,000 for married filing joint (up from $12,700)
- Increased Child Tax Credit – The maximum credit was doubled to $2,000 per qualifying child and up to $1,400 of the credit is refundable. Even if you don’t owe you can receive the credit.
- New credit for other dependents – There’s a new $500 credit for qualified dependents that aren’t children under age 17.
- Health care – the penalty for not having health insurance after Dec. 31, 2018 has been eliminated. Now you can deduct medical expenses that are more than 7.5% of your adjusted gross income instead of the previous threshold of 10%.
- Alternative Minimum Tax (AMT) – The exemption deductions were increased helping more middle-income earners avoid this tax.
GD: Are there tax law changes that may reduce refund amounts?
B: Yes, there were also tax law changes that eliminated or reduced deductions. Here’s a summary of some of the changes that won’t be good news for some taxpayers:
- Moving expenses – only qualified military personnel can now deduct moving expenses
- Personal and dependent exemptions – these exemptions which were $4,150 for each exemption were eliminated. So taxpayers with a large number of dependents will feel the impact of this tax law change.
- Home equity loan interest – you can no longer deduct interest on a home equity loan unless you used the loan to buy, build or dramatically improve your home and the loan is secured by your home
- State and local tax deductions – Total deductions for state and local income tax is limited to a total of $10,000 ($5,000 if married filing separately)
- Casualty & theft losses – You can no longer take a deduction for casualty or theft losses unless you live in an area that the President declared a disaster area
GD: How can people keep track of all of these changes?
B: Exactly! Whether you hire a tax professional or use software that guides you through the complicated tax law it’s important to go with someone you trust. It’s unreasonable to expect taxpayers to be informed of all of the tax law changes, so taxpayers want to make sure that they use a reputable company
GD: Any other tips for getting a refund as fast as possible?
B: There are some very simple things you can do.
- File fast – while the industry is making progress in reducing identity theft, it still exists. If an identity theft files a tax return with your information, it can take months to receive your refund
- E-file – electronically filing a return is 3-5 weeks faster than filing a paper return
- Direct deposit – even if you file electronically, you will face delays by requesting a paper check instead of direct deposit. If you already have a Green Dot card login to the website or mobile app to get your direct deposit info.
- Accuracy counts – make sure the information on your tax return is accurate. Before your return is filed make sure to check that the information you are providing the IRS is accurate and correct.
Finally, these tips provide some general information, but this is not intended as a substitute for getting legal, accounting or financial advice. Before you take any action, you should always seek the assistance of a reputable tax preparation company.
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