Taxpayers with children, other dependents should check withholding ASAP

Taxpayers who have children and other dependents should use the Withholding Calculator on IRS.gov to perform a “paycheck checkup.” The Tax Cuts and Jobs Act, which was passed late last year, includes changes that will affect 2018 tax returns that people will file in 2019.

Doing a checkup ASAP will help taxpayers determine if they need to adjust their withholding on their paychecks. The earlier they do this, the better. The sooner someone checks it, the more time there is for withholding to take place evenly during the rest of the year. Waiting until later in the year means there are fewer pay periods to make the tax changes.

The new law made changes to the child tax credit and personal exemptions. Taxpayers should do a “paycheck checkup” to determine if the tax law changes could affect their tax situation this year. Here is an overview of the changes to the law that could affect the withholding of parents and caretakers:

Child tax credit

  • The maximum child tax credit increased from $1,000 to $2,000 per qualifying child.
  • Taxpayers whose income was too high to benefit from the Child Tax Credit in prior years may now find they qualify.
  • The credit now phases 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.

Additional child tax credit

  • The maximum additional child tax credit increased from $1,000 to $1,400.
  • The ACTC is a refundable credit for taxpayers who owe little or no federal income tax. 

Credit for other dependents

  • There’s a new $500 credit that can benefit taxpayers who support other dependents.
  • The taxpayer will claim the credit when filing a tax return.
  • For purposes of this new credit, other dependents include qualifying children or qualifying relatives, such as a college      student or an elderly parent.

Personal exemption

  • The new law removes the personal exemption that taxpayers formerly claimed for themself, their spouse and dependents.

The Withholding Calculator allows taxpayers to enter their expected 2018 income, deductions, adjustments and credits – including the child tax credit. Users can click on definitions in the calculator for help in figuring out who qualifies for these expanded credits. 

For information about how to use the calculator and how to change withholding, taxpayers can check out the IRS Tax Reform Tax Tips on IRS.gov.

Taxpayers may also need to determine if they should make adjustments to their state or local withholding. They can contact their state's department of revenue to learn more.

More information:
Withholding Calculator Frequently Asked Questions
Tax Withholding
Tax Reform page on IRS.gov

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What taxpayers can do when a letter arrives this summer

Some taxpayers will receive a letter from the IRS this summer. Taxpayers should not panic and remember that they have fundamental rights when interacting with the agency.

These rights are in the Taxpayer Bill of Rights. Among other things, these rights dictate that letters from the IRS must include:

  • Details about what the taxpayer owes, such as tax, interest and penalties.
  • An explanation about why the taxpayer owes the taxes.
  • Specific reasons about why the IRS may have denied a refund claim.

Taxpayers who receive a letter from the IRS can do some simple things when it arrives. Taxpayers should remember to:

  • Read the entire letter carefully. Most letters deal with a specific issue and provide specific instructions on what to do.
          
  • Compare it with the tax return. If a letter indicates a changed or corrected tax return, taxpayer should review the information      and compare it with their original return.
          
  • Respond. Taxpayers should:
    • Respond to a letter with which they do not agree.
    • Mail a letter explaining why they disagree.
    • Mail their response to the address listed at the bottom of the letter.
    • Include information and documents for the IRS to consider.
    • Allow at least 30 days for a response.
  • Reply timely if necessary. If a taxpayer agrees with the information, there’s no need to contact the IRS. However, when a      specific response date is in the letter, there are two main reasons a taxpayer should respond by that date:
    • To minimize additional interest and penalty charges.
    • To preserve appeal rights if the taxpayer doesn’t agree.
  • Pay. Taxpayers should pay as much as they can, even if they can’t pay the full amount they owe. They can pay online or apply for an Online Payment Agreement or Offer in Compromise.
  • Contact the IRS if necessary. For most letters, there’s no need to call the IRS or make an appointment at a taxpayer      assistance center. If a call seems necessary, the taxpayer can call the phone number in the upper right-hand corner of the letter. They should have a copy of the tax return and letter on hand when calling.
  • Keep the letter. A taxpayer should keep copies of any IRS letters or notices received with their tax records.

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ITIN expiration continues for ITINs issued in certain years and ITINs that have not been used on a tax return for three consecutive years. The IRS is urging individuals whose ITINs will expire in December of 2018 to start preparing their renewal requests now to avoid delays, as over 2 million ITINs will expire at the end of this year.

 

See https://www.irs.gov/newsroom/more-than-2-million-itins-to-expire-this-year-renew-soon-to-avoid-refund-delays for more details.

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Information items such as

W-2s, 1099s, 1098Ts, 1042S and others have been prepared and either mailed or made available online.

To access your Form 1098T use the following:

SITE ID: 11486

USERNAME: Student ID

TEMP PASSWORD: Last four digits of SSN

URL: www.tsc1098t.com

If you graduated in the spring you will not have a form as the college and institute prepare the forms based on billings not on payments.

If you have techinical difficulty please call 888-220-2540.

If you did not provide a Social Security number or mailing address to the college you will not have a form.

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For International Students and visitors, the Forms 8843 (which are filed with your 2017 income tax returns) have been uploaded and are available in FNIS. You may have more than one copy, but only ONE is needed for filing purposes. You will also find a new Form 8233 for the new tax year. Please sign and return this form to the Tax Office. The Forms 1042S have also been uploaded.

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The new tax laws include changes that affect many people. As these become more detailed the effects will be posted here.