What’s new with the child tax credit after tax reform

Many people claim the child tax credit to help offset the cost of raising children. Tax reform legislation enacted last year made changes to that credit. Here are some important things for taxpayers to know about the changes to the credit.
• Credit amount. The new law increases the child tax credit from $1,000 to $2,000. Eligibility for the credit has not changed. As in past years, the credit applies if all of these apply:
o the child is younger than 17 at the end of the tax year, December 31, 2018
o the taxpayer claims the child as a dependent
o the child lives with the taxpayer for at least six months of the year
• Credit refunds. The credit is refundable, now up to $1,400. If a taxpayer doesn’t owe any tax before claiming the credit, they will receive up to $1,400 as part of their refund.
• Earned income threshold. The income threshold to claim the credit has been lowered to $2,500 per family. This means a family must earn a minimum of $2,500 to claim the credit.
• Phaseout. The income threshold at which the child tax credit begins to phase out is increased to $200,000, or $400,000 if married filing jointly. This means that more families with children younger than 17 qualify for the larger credit.
Dependents who can’t be claimed for the child tax credit may still qualify the taxpayer for the credit for other dependents. This is a non-refundable credit of up to $500 per qualifying person. These dependents may also be dependent children who are age 17 or older at the end of 2018. It also includes parents or other qualifying relatives supported by the taxpayer.
More information:
• Publication 972, Child Tax Credit
• Withholding Calculator Frequently Asked Questions
• Tax Withholding
• Tax Reform page on IRS.gov

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Tool on IRS.gov helps taxpayers research charities before making donations

When people are done giving thanks at the dinner table, many start another kind of giving. The annual Giving Tuesday happens the week after Thanksgiving to kick off the season of charitable giving. This year, Giving Tuesday falls on Tuesday, November 27.

Taxpayers may be able to deduct donations to tax-exempt organizations on their tax return. As people are deciding where to make their donations, the IRS has a tool that may help. Tax Exempt Organization Search on IRS.gov is a tool that allows users to search for charities. It provides information about an organization’s federal tax status and filings.

Here are four facts about the Tax Exempt Organization Search tool:
• Donors can use it to confirm an organization is tax-exempt and eligible to receive tax-deductible charitable contributions.
• Users can find out if an organization had its tax-exempt status revoked. A common reason for revocation is when an organization does not file its Form 990-series return for three consecutive years.
• EO Select Check does not list certain organizations that may be eligible to receive tax-deductible donations, including churches, organizations in a group ruling, and governmental entities.
• Organizations are listed under the legal name or a “doing business as” name on file with the IRS. No separate listing of common or popular names is searchable.

Taxpayers can also use the Interactive Tax Assistant, Can I Deduct my Charitable Contributions? to help determine if a charitable contribution is deductible.

Taxpayers may also want to decide now if they’ll itemize their deductions when they file next year. Last year’s tax reform legislation made changes to the standard deductions and itemized deductions. Many individuals who formerly itemized may now find it more beneficial to take the standard deduction. So, taxpayers should check their 2017 itemized deductions to make sure they understand what these changes mean to their tax situation for 2018. More information about these changes is on IRS.gov/taxreform.
More Information:
Tips for Tax Exempt Organization Search
Tax Exempt Organization Search: Frequently Asked Questions
Tax Reform Basics for Individuals and Families
IRS YouTube Videos:
Tax Exempt Organization Search English | ASL
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Cambios en reforma tributaria podría reducir número de contribuyentes que detallan

WASHINGTON — El Servicio de Impuestos Internos les informó hoy a los contribuyentes que la duplicación de la deducción estándar debido a cambios en la ley tributaria es probable que reduzca el número de contribuyentes que normalmente detallan.
Este es el sexto de una serie de recordatorios para ayudar a los contribuyentes a prepararse para la próxima temporada de impuestos. El IRS actualizó una página especial en su sitio web con pasos a tomar ahora para la temporada de impuestos de 2019.
En años anteriores, aproximadamente uno de cada tres contribuyentes ha detallado. El IRS espera que ese número sea menor para el año tributario 2018. La Ley de Empleos y Reducción de Impuestos (TCJA, por sus siglas en inglés) aprobada en diciembre de 2017, afecta significativamente las deducciones de varias maneras, impactando a los contribuyentes que normalmente detallan.
TCJA duplica la cantidad de la deducción estándar para todos los estados civiles tributarios. La deducción estándar es una cantidad monetaria que reduce el monto de ingresos sobre el cual el contribuyente tiene que pagar impuestos y varía según su estado civil tributario. Debido a esto, muchos contribuyentes calificados pueden encontrar que la deducción estándar aumentada es más que el total de sus deducciones detalladas, y optar por elegir la deducción estándar en lugar de detallar.
Los contribuyentes deben verificar sus deducciones detalladas de 2017 para asegurarse de que entienden lo que los cambios en la reforma tributaria podrían significar para su situación tributaria en 2018. Los que todavía planifican detallar completarán una versión actualizada del Anexo A y la incluirán con su declaración de impuestos.
La Publicación 5307, Reforma tributaria: conceptos básicos para individuos y familias (en inglés), es un recurso clave para entender el impacto de la nueva ley de reforma tributaria sobre las deducciones. La publicación proporciona información acerca de:
• aumento de deducciones estándar,
• eliminación de exenciones personales,
• aumento del crédito tributario por hijos,
• nuevo crédito para otros dependientes, y
• limitación o descontinuación de ciertas deducciones.
El IRS les recuerda a los contribuyentes que la mejor manera de presentar una declaración de impuestos precisa es usar software de impuestos y presentar electrónicamente o buscar la ayuda de un profesional de impuestos para preparar y presentar su declaración de impuestos. El IRS ofrece consejos para elegir un profesional de impuestos (en inglés).
Los contribuyentes con ingresos de menos de $66,000 en 2018 pueden calificar para Free File del IRS y pueden acceder a software de impuestos gratis en línea.
Los programas del IRS de Ayuda Voluntaria a los Contribuyentes y de Asesoramiento Tributario para Personas de Edad Avanzada ofrecen a los contribuyentes con ingresos de menos de $55,000 en 2018, preparación gratuita de declaraciones de impuestos y presentación electrónica en persona por parte de voluntarios certificados por el IRS. Para más información y ubicaciones, vaya a IRS.com

Tax reform changes likely to reduce number of taxpayers who itemize

WASHINGTON — The Internal Revenue Service today advised taxpayers that the doubling of the standard deduction due to tax law changes is likely to reduce the number of taxpayers who normally itemize.

This is the sixth in a series of reminders to help taxpayers Get Ready for the upcoming tax filing season. The IRS has recently updated its Get Ready page with steps to take now for the 2019 tax filing season.

In previous years, about one out of three taxpayers itemized. The IRS expects that number to be less for the tax year 2018. The Tax Cuts and Jobs Act (TCJA) passed in December 2017, significantly affects deductions in several ways, impacting those taxpayers who normally itemize.

The TCJA doubles the standard deduction amount for all filing statuses. The standard deduction is a dollar amount that reduces the amount of income on which a taxpayer is taxed and varies according to their filing status. Because of this, many qualifying taxpayers may find the increased standard deduction more than their total itemized deductions and opt for choosing the standard deduction rather than itemizing.

Taxpayers should check their 2017 itemized deductions to make sure they understand what the tax reform changes could mean for their tax situation in 2018. Those who still plan to itemize will complete an updated version of Schedule A, Itemized Deductions, and attach it to their tax return.

Publication 5307, Tax Reform Basics for Individuals and Families, is a key resource to understanding the impact of the tax reform law on deductions. The publication provides information about:

• increasing the standard deduction,
• suspending personal exemptions,
• increasing the child tax credit,
• adding a new credit for other dependents, and
• limiting or discontinuing certain deductions.

The IRS reminds taxpayers that the best way to file an accurate tax return is to use tax software and e-file or seek the help of a tax professional who will prepare and e-file their tax return. The IRS offers tips for choosing a tax professional.

Taxpayers who earned less than $66,000 in 2018 may qualify for IRS Free File and can access no-cost tax software online.
The IRS Volunteer Income Tax Assistance and Tax Counseling for the Elderly programs offer those taxpayers who earned less than $55,000 in 2018 free face-to-face tax return preparation and free e-file from IRS-trained volunteers. For more information and locations, go to IRS.gov/VITA.

Get 2018 tax documents ready for upcoming filing season!

IR-2018-225
WASHINGTON –The IRS reminds taxpayers to keep a copy of their past tax returns and supporting documents for at least three years. Certain key information from their prior year return may be required to file in 2019.
This is the fifth in a series of reminders to help taxpayers Get Ready for the upcoming tax filing season. The IRS has recently updated its Get Ready page with steps to take now for the 2019 tax filing season.
Keeping copies of prior year tax returns saves time. Often previous tax information is needed to file a current year tax return or to answer questions from the Internal Revenue Service. Taxpayers claiming certain securities or debt losses should keep their tax returns and documents for at least seven years.

Use a tax return to validate the identity

Taxpayers using tax filing software for the first time may need their adjusted gross income (AGI) amount from their prior year’s tax return to verify their identity. Learn more at Validating Your Electronically Filed Tax Return. Those who need a copy of their tax return should first check with their software provider or tax preparer. Taxpayers can also obtain a free tax transcript from the IRS, or for a fee, order a copy of their tax return.

Order a transcript

A tax transcript can be ordered from the IRS. It summarizes tax return information and includes AGI. Tax transcripts are free and available for the most current tax year after the IRS has processed the tax return. Tax transcripts are available for the past three tax years.

Plan ahead. Delivery times for online and phone orders typically take five to 10 days from the time the IRS receives the request. Taxpayers who order by mail should allow 30 days to receive transcripts and 75 days for tax returns.

There are three ways for taxpayers to order a transcript:

• Online. Taxpayers can use Get Transcript Online on IRS.gov to view, print or download a copy of all transcript types. Those who use it must authenticate their identity and create an account using the Secure Access process. Please allow five to 10 calendar days for delivery.
• By phone. Call 800-908-9946.
• By mail. Taxpayers who are unable to register or prefer not to use Get Transcript Online may use Get Transcript by Mail. Taxpayers can complete and send the IRS either Form 4506-T, Request for Transcript of Tax Return, or Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript. Use Form 4506-T to request other tax records: tax account transcript, the record of account, wage and income and verification of non-filing. These forms are available on the Forms, Instructions and Publications page on IRS.gov.Those who need an actual copy of a tax return can get one for the current tax year and as far back as six years. The fee per copy is $50. Taxpayers can complete and mail Form 4506 to request a copy of a tax return and mail the request to the appropriate IRS office listed on the form.
• If taxpayers need information to verify payments within the last 18 months or a tax amount owed, they can view their tax account.
• The IRS is now redacting tax transcripts so that sensitive information, such as the taxpayer’s name, address, and Social Security number, is partially masked. However, all financial entries, such as the adjusted gross income, are visible. The redacted transcript will better protect taxpayers from identity theft.

New tax law allows small businesses to expense more, expands bonus depreciation

WASHINGTON — The Internal Revenue Service today reminded small business taxpayers that changes to the tax law mean they can immediately expense more of the cost of the certain business property. Many are now able to write off most depreciable assets in the year they are placed into service.
The Tax Cuts and Jobs Act (TCJA), passed in December 2017, made tax law changes that will affect virtually every business and individual in 2018 and the years ahead. Among those for business owners are tax rate changes for pass-through entities, changes to the cash accounting method for some, limits on certain deductions and more.

Section 179 expensing changes

A taxpayer may elect to expense all or part of the cost of any Section 179 property and deduct it in the year the property is placed in service. The new law increased the maximum deduction from $500,000 to $1 million. It also increased the phase-out threshold from $2 million to $2.5 million. These changes apply to property placed in service in taxable years beginning after Dec. 31, 2017. For most businesses, this means the 2018 return they file next year.
Section 179 property includes business equipment and machinery, office equipment, livestock and if elected, qualified real property. The TCJA also modifies the definition of qualified real property to allow the taxpayer to elect to include certain improvements made to the nonresidential real property. See New rules and limitations for depreciation and expensing under the Tax Cuts and Jobs Act for more information.

New 100 percent, first-year ‘bonus’ depreciation

The 100 percent depreciation deduction generally applies to depreciable business assets with a recovery period of 20 years or less and certain other property. Machinery, equipment, computers, appliances, and furniture generally qualify. The law also allows expensing for certain film, television, and live theatrical productions, and used qualified property with certain restrictions.

The deduction applies to business property acquired after Sept. 27, 2017, and placed in service after Sept. 27, 2017, and before Jan. 1, 2023. In general, the bonus depreciation percentage is reduced for property placed in service after 2022. See the proposed regulations for more details.

Taxpayers may elect out of the additional first-year depreciation for the taxable year the property is placed in service. If the election is made, it applies to all qualified property that is in the same class of property and placed in service by the taxpayer in the same taxable year. The instructions for Form 4562, Depreciation and Amortization, provide details.
Business owners can refer to the Tax Reform Provisions that Affect Businesses page for updates.

More resources:
• Publication 535, Business Expenses
• Publication 946, How to Depreciate Property
• Additional First-Year Depreciation Deduction (Bonus) FAQs
• Tax Cuts and Jobs Act: A Comparison for Businesses

Tax Reform changes depreciation limits on luxury automobiles

The Tax Cuts and Jobs Act changed depreciation limits for passenger vehicles placed in service after Dec. 31, 2017. If the taxpayer doesn’t claim bonus depreciation, the greatest allowable depreciation deduction is:
• $10,000 for the first year
• $16,000 for the second year
• $9,600 for the third year
• $5,760 for each later taxable year in the recovery period
If a taxpayer claims 100 percent bonus depreciation, the greatest allowable depreciation deduction is:
• $18,000 for the first year
• $16,000 for the second year
• $9,600 for the third year
• $5,760 for each later taxable year in the recovery period
This change applies to property placed in service after Dec. 31, 2017.
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IRS provides tax inflation adjustments for tax year 2019

WASHINGTON — The Internal Revenue Service today announced the tax year 2019 annual inflation adjustments for more than 60 tax provisions, including the tax rate schedules and other tax changes. Revenue Procedure 2018-57 provides details about these annual adjustments. The tax the year 2019 adjustments generally are used on tax returns filed in 2020.

The tax items for tax year 2019 of greatest interest to most taxpayers include the following the g dollar amounts:
• The standard deduction for married filing jointly rises to $24,400 for tax year 2019, up $400 from the prior year. For single taxpayers and married individuals filing separately, the standard deduction rises to $12,200 for 2019, up $200, and for heads of households, the standard deduction will be $18,350 for tax year 2019, up $350.
• The personal exemption for tax year 2019 remains at 0, as it was for 2018, this elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act.
• For tax year 2019, the top rate is 37 percent for individual single taxpayers with incomes greater than $510,300 ($612,350 for married couples filing jointly). The other rates are:
o 35 percent, for incomes over $204,100 ($408,200 for married couples filing jointly);
o 32 percent for incomes over $160,725 ($321,450 for married couples filing jointly);
o 24 percent for incomes over $84,200 ($168,400 for married couples filing jointly);
o 22 percent for incomes over $39,475 ($78,950 for married couples filing jointly);
o 12 percent for incomes over $9,700 ($19,400 for married couples filing jointly).
o The lowest rate is 10 percent for incomes of single individuals with incomes of $9,700 or less ($19,400 for married couples filing jointly).
• For 2019, as in 2018, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act.
• The Alternative Minimum Tax exemption amount for tax year 2019 is $71,700 and begins to phase out at $510,300 ($111,700, for married couples filing jointly for whom the exemption begins to phase out at $1,020,600). The 2018 exemption amount was $70,300 and began to phase out at $500,000 ($109,400 for married couples filing jointly and began to phase out at $1 million).
• The tax year 2019 maximum Earned Income Credit amount is $6,557 for taxpayers filing jointly who have three or more qualifying children, up from a total of $6,431 for tax year 2018. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phase-outs.
• For tax year 2019, the monthly limitation for the qualified transportation fringe benefit is $265, as is the monthly limitation for qualified parking, up from $260 for tax year 2018.
• For calendar year 2019, the dollar amount used to determine the penalty for not maintaining minimum essential health coverage is 0, per the Tax Cuts and Jobs act; for 2018 the amount was $695.
• For the taxable years beginning in 2019, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements is $2,700, up $50 from the limit for 2018.
• For tax year 2019, participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,350, an increase of $50 from tax year 2018; but not more than $3,500, an increase of $50 from tax year 2018. For self-only coverage, the maximum out-of-pocket expense amount is $4,650, up $100 from 2018. For tax year 2019, participants with family coverage, the floor for the annual deductible is $4,650, up from $4,550 in 2018; however, the deductible cannot be more than $7,000, up $150 from the limit for the tax year 2018. For family coverage, the out-of-pocket expense limit is $8,550 for tax year 2019, an increase of $150 from tax year 2018.
• For tax year 2019, the adjusted gross income amount used by joint filers to determine the reduction in the Lifetime Learning Credit is $116,000, up from $114,000 for tax year 2018.
• For tax year 2019, the foreign earned income exclusion is $105,900 up from $103,900 for tax year 2018.
• Estates of decedents who die during 2019 have a basic exclusion amount of $11,400,000, up from a total of $11,180,000 for estates of decedents who died in 2018.
• The annual exclusion for gifts is $15,000 for calendar year 2019, as it was for calendar year 2018.
• The maximum credit allowed for adoptions is the amount of qualified adoption expenses up to $14,080, up from $13,810 for 2018.