TWIN FALLS — Some tax return filers may receive an unpleasant surprise this year.
The deadline for filing your tax return is several months away, but state and federal employees will begin processing returns on Monday.
“A lot of people may be surprised that they may owe or have a smaller refund,” said Renee Eymann, spokeswoman for the Idaho Tax Commission. “For some it might be more dramatic than others.”
New tax laws and changes to withholding tables last spring meant that employees who didn’t file a new W-4 may have under-withheld from their wages for half the year. And if you don’t file a new federal and state W-4 soon, you could see a bigger impact on your 2019 return.
In past years, Idaho didn’t have a separate W-4 for the state taxes, Eymann said, but that’s since changed. The state Form ID W-4 is available at tax.idaho.gov.
“All of the changes, first of all, meant that we can no longer use the federal W-4,” Eymann said. “We’re just too different now.”
But many taxpayers haven’t gotten the message, creating a cash-flow problem for the state. According to the Post Register, overall general fund revenues for the first half of the fiscal year were down $101.6 million from the same time a year ago. It’s believed that’s the case largely because many taxpayers didn’t adjust their W-4s, so less money is being withheld.
A lot of people choose to over-withhold and use it as a sort of savings account, said Sandy Lapray, owner and tax preparer at Taxes by the Book. Lapray herself uses her returns for a vacation each year.
Despite the federal government shutdown, the Internal Revenue Service expects to process returns on time. Already, tax preparers are getting slammed with questions and appointments — and it’s only expected to get busier as the April 15 deadline approaches.
So far, Lapray isn’t seeing too many more people who have to owe money, but the refunds are sometimes smaller. One of Lapray’s clients had an income increase of only a couple thousand dollars, but his refund went from $480 in 2017 to $5 in 2018.
“He was really relieved he didn’t owe,” Lapray said.
Here are seven things you should know before filing your 2018 state and federal tax returns:
The personal exemption is gone
You used to be able to claim yourself as an exemption on your taxes, Lapray said. And that’s not all — dependency exemptions have also gone away. Those previously allowed someone to subtract $4,050 from their taxable income for themselves and each dependent in the household.
Now instead of an exemption, all you get is the standard deduction and credits, Lapray said.
“It makes a big difference,” she said.
The standard deduction almost doubled
The standard deduction has basically doubled, increasing to $12,000 for a single person, $18,000 for a head of household and $24,000 for those who are married and filing jointly.
“Because of the standard deduction going up, a lot of people won’t itemize,” Lapray said.
Idaho has a new child tax credit
This year, parents can claim a new child tax credit on their state income taxes. The credit is $205 per child younger than 17 years old. Additionally, the federal government increased its credit to $2,000.
Idaho taxpayers will also be able to deduct more when they adopt a child. That amount has changed from $3,000 to $10,000.
Some small businesses get a new deduction
The new Section 199A tax break allows qualifying businesses to deduct up to 20 percent of their profits as non-taxable income, Lapray said. This affects domestic businesses operated as a sole proprietorship or through a partnership, S corporation, trust or estate.
Income tax rates decreased
Idaho’s income tax rates decreased by .475 percent, with the highest rate now at 6.925 percent.
Employees can’t write off business expenses
Earlier rules allowed employees to claim unreimbursed business expenses — such as travel, supplies or uniforms — as a deduction on their tax returns. That’s no longer the case, and Lapray expects some truckers to be hit hard by the change.
How you can get help
Due to the shutdown, tax preparers are having a hard time getting assistance from the IRS for filing online. And the IRS was also not answering its phones to help consumers.
If you have questions about filling out the federal W-4 or ID W-4, visit tax.idaho.gov/w4. You can also get help with the state W-4 by calling 1-800-972-7660 between 8 a.m. and 5 p.m. weekdays. The Idaho Tax Commission also has a field office at 440 Falls Ave., which is open 8 a.m. to 4 p.m. weekdays.
You can find information for filing your federal tax returns at irs.gov.