20 Nov Three questions to answer to get ready for tax season
End of year is ideal time to prepare for tax season
It’s never too early to get ready for tax season. And really, tax preparation season in the United States will get here before you know it. To help you prepare for tax season, below are three items to consider before the new year arrives.
Did you hear about the Child Tax Credit changes?
Individual taxes underwent drastic changes in the Tax Cuts and Jobs Act of 2017. One of the biggest changes was to the Child Tax Credit, according to the Internal Revenue Service.
The Tax Cuts and Jobs Act doubled the maximum Child Tax Credit, boosted income limits to be able to claim the credit, and revised the identification number requirement for 2018 and subsequent years. The new law also created a second smaller credit of up to $500 per dependent aimed at taxpayers supporting older children and other relatives who do not qualify for the Child Tax Credit.
Along with the Child Tax Credit increase, here are some important things taxpayers need to know as they plan for the tax-filing season in early 2019:
• Higher income limits mean more families are now eligible for the Child Tax Credit. The credit begins to phase out at $200,000 of modified adjusted gross income, or $400,000 for married couples filing jointly, which is up from the 2017 levels of $75,000 for single filers or $110,000 for married couples filing jointly.
• Increased from $1,000 to $2,000 per qualifying child, the credit applies if the child is younger than 17 at the end of the tax year, the taxpayer claims the child as a dependent, and the child lives with the taxpayer for more than six months of the year. The qualifying child must also have a valid Social Security Number issued before the due date of the tax return, including extensions.
• Up to $1,400 of the credit can be refundable for each qualifying child. This means an eligible taxpayer may get a refund even if they don’t owe any tax.
Do you need to renew your ITIN?
The IRS reminds taxpayers with expiring Individual Taxpayer Identification Numbers to submit their renewal applications as soon as possible. Failing to renew them by the end of this year will cause refund and processing delays in 2019.
The IRS has mailed more than 1.3 million letters to taxpayer households that include an ITIN holder with middle digits 73, 74, 75, 76, 77, 81 or 82. Affected taxpayers who expect to file a tax return in 2019 should submit a renewal application now.
To help taxpayers, the IRS has prepared a variety of informational materials, including flyers and fact sheets, available in several languages on IRS.gov.
Have you updated your tax withholdings?
Many taxpayers are at risk for having too little tax withheld from their pay but you can avoid a surprise year-end tax bill by quickly updating the withholding form they give to their employer, according to the Internal Revenue Service.
Although the tax reform law, enacted last December, lowered tax rates for most taxpayers, it also nearly doubled the standard deduction and limited or discontinued many deductions, among other changes. As a result, taxpayers who itemized in the past who now choose to take advantage of the increased standard deduction, as well as two-wage-earner households, employees with non-wage sources of income and those with complex tax situations, are at most risk of having too little tax withheld from their pay. This is especially true if they didn’t update their withholding earlier this year.
Ever since the revised withholding tables went into effect, the IRS has been urging employees to perform a Paycheck Checkup. The fastest and easiest way to do that is to use the Withholding Calculator, available on IRS.gov.