The passage of the Tax Cuts and Jobs Act (TJCA) has affected every taxpayer a little differently. Because of this, the IRS has encouraged taxpayers to do a “Paycheck Checkup” to make sure they aren’t underwithholding or overwithholding their taxes throughout the year.
In particular, taxpayers in any of the following situations should update their W-4 form or estimated tax payments.
Taxpayers with Multiple Income Sources or Two-Income Families
It’s easy to get your tax withholdings confused when you have two or more sources of income. You may end up counting your deductions or credits more than once if you are filling out separate W-4 forms for multiple employers.
Taxpayers with side gigs may also need to either pay estimated taxes or increase their withholdings to account for their additional income sources.
If you only work part of the year, a bigger portion of your annual tax liability needs to be withheld from each paycheck. This can impact college students, retirees, or anyone else who works a seasonal job.
Claiming the Child Tax Credit or Other Dependents
The Child Tax Credit has been totally revamped. The maximum credit amount has been expanded and the income thresholds have been increased, so more taxpayers are eligible and can receive higher credits.
Keep in mind, however, that the benefits of the new Child Tax Credit may be offset by the elimination of dependency exemptions.
You can’t claim the Child Tax Credit for any dependents age 17 or older. You’ll need to use the Credit for Other Dependents, which has a maximum credit amount of $500 per dependent.
You Itemize Deductions
Taxpayers who itemize will be impacted in several ways. The standard deduction amount has been increased, making it likely that some taxpayers who used to itemize will now take the standard deduction.
However, the overall limitation on itemized deductions has also been eliminated, which could cause some taxpayers to claim more itemized deductions. Miscellaneous itemized deductions have also been eliminated, and new limits were placed on the deductibility of property taxes and mortgage interest.
If you don’t adjust your withholdings or estimated taxes now, you may end up underpaying your taxes and need tax resolution help to manage your tax debt.
Get help with IRS tax debt by calling The Gartzman Law Firm at (770) 939-7710. We can listen to your concerns and help you find the best tax resolution strategy for your case.