The Internal Revenue Service released a statement urging taxpayers with children and other dependents to use the Withholding Calculator on the IRS.gov website to do a “paycheck checkup.” This is due to the changes created in the 2017 Tax Cuts and Jobs Act that can affect 2018 returns that taxpayers will file in 2019.
Curious how these changes could affect your 2018 tax situation? Here is a clear cut list of the major changes in relation to the Child Tax Credit:
- 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.
For more information about these credits, visit Steps to Take Now to Get a Jump on Next Year’s Taxes on IRS.gov.
The Withholding Calculator is an accurate, simple way for most taxpayers to determine their correct withholding amount. The tool allows taxpayers to enter their expected 2018 income, deductions, adjustments and credits – including the Child Tax Credit.
The Withholding Calculator will recommend how to complete new Forms W-4 with all employers. If a taxpayer is at risk of being under-withheld, the calculator will recommend an additional amount of tax withholding for each job. The taxpayer can enter these amounts on their respective Forms W-4.
Employees who complete a new Form W-4 should submit it to their employers as soon as possible.