The IRS has recently published noteworthy tips that every taxpayer should know about and address ASAP.
First, taxpayers with children or other dependents should perform a “paycheck checkup” using the Withholding Calculator right away. Changes made by the 2017 Tax Cuts and Jobs Act will affect 2018 returns that taxpayers will file in 2019.
The IRS has also posted a video on how to use their Withholding Calculator. Please click here to view this helpful video.
The law expanded and made significant changes to the Child Tax Credit. It also suspended the deduction for personal exemptions. Parents and caregivers should do a “paycheck checkup” to determine how these changes could affect their 2018 tax situation.
The Tax Cuts and Jobs Act:
- Raises the Child Tax Credit from $1,000 to $2,000.
- Offers the Additional Child Tax Credit for certain individuals who cannot receive the full amount of the Child Tax Credit. The Additional Child Tax Credit is up to $1,400 of the Child Tax Credit and is refundable for each qualifying child. A refundable credit may give taxpayers a refund even if they don’t owe any tax.
- Changes phase-outs for the Child Tax Credit and the Additional Child Tax Credit. These credits now begin to phase out at $400,000 for couples and $200,000 for singles, compared with 2017 amounts of $110,000 for couples and $75,000 for singles.
- Adds a new credit. Dependents who can’t be claimed for the Child Tax Credit may still qualify taxpayers for the Credit for Other Dependents. This is a credit of up to $500 per qualifying person. The phase-out amounts of the Child Tax Credit apply to this credit.
Among the groups who should check their withholding are:
- Two-income families
- People working two or more jobs or who only work for part of the year
- People with children who claim credits such as the child tax credit
- People with other dependents who can’t be claimed for the child tax credit, including children age 17 or older
- People who itemized deductions on their 2017 tax return
- People with high incomes and more complex tax returns
- People with large tax refunds or large tax bills for 2017
Then, if you find that you do in fact need to change your withholding amount you should submit a new Form W-4 to your employer.
Do you have questions or need assistance? Davis & Hodgdon Associates CPAs has been assisting Vermont individuals and business owners with tax consulting and retirement planning for more than 25 years. Call our office in Williston 802.878.1963 or Rutland 802. 775-7132 to schedule a tax planning strategy session today.