This is the first of two newsletters in December. In this issue, I’ll go over a few changes affecting credits for dependents, the IRS’ paycheck checkup, and how to choose a tax preparer. If there are topics that you would like me to address, please contact me and let me know.
Do you have children or other dependents? The Tax Cuts and Jobs Act (TCJA) increased the child tax credit and created a new credit for other dependents. The TCJA also increased the income levels for the credits so more taxpayers will qualify. The Child Tax Credit doubled to $2,000. To qualify, a taxpayer must claim the child as a dependent, the child must be younger than 17 at the end of the tax year, the child must live with the taxpayer more than six months of the year, and the child must have a valid Social Security number. Up to $,1400 of the credit is refundable, so eligible taxpayers may receive a refund even if they do not owe any tax. The new Credit for Other Dependents is available for taxpayers that cannot claim the Child Tax Credit. This could include dependent children older than, parents, or other qualifying relatives. If you think you may qualify, you should talk to your tax professional.
Avoid surprises in April! The IRS is encouraging taxpayers to do a paycheck checkup. Changes in the tax code from the TCJA may affect the amount of tax you owe. If you are an employee, you should check out the withholding calculator on the IRS website. www.irs.gov/individuals/irs-withholding-calculator Depending on what you learn, you may want to adjust your withholding by filing a new Form W-4.
How to choose someone to prepare your taxes. If you have a complex tax situation of if you simply prefer the piece of mind that comes from hiring a professional to do your tax returns, please know that there is not a lot of regulation of tax preparers. You want to be careful when you make your choice. The IRS published a list of tips for choosing a tax preparer. Here’s the list:
- Check the Preparer’s Qualifications.
- Check the Preparer’s History
- Ask about Service Fees.
- Ask to E-File.
- Make Sure the Preparer is Available.
- Provide Records and Receipts.
- Never Sign a Blank Return.
- Review Before Signing.
- Ensure the Preparer Signs and Includes Their PTIN.
- Report Abusive Tax Preparers to the IRS.
You can read the details directly on the IRS website. The short version of the article is to check the preparer’s qualifications and make sure the preparer will be there after the tax season, ask questions, provide documentation, e-file and don’t sign blank returns. If you do come across a tax preparer that acts unprofessionally or unethically, report him or her to the IRS.