Tag Archives: taxpayers

Is the Tax Cuts and Jobs Act Supporting the Decision to Have More Children?

Last winter Congress passed the Tax Cuts and Jobs Act (TCJA) in an effort to lower income taxes for virtually all taxpayers. As a result, most Americans are expecting larger refunds this spring. Supporters of the bill believe this will help improve the economy, while others believe it is fiscally irresponsible. Whatever your belief is, it is certainly changing the way tax returns are prepared and enhancing certain credits.

One of the major changes with the Tax Cuts and Jobs Act, is that the deduction for personal exemptions has been suspended. This is often a significant benefit for taxpayers and families with children. The new tax code however, is increasing the child tax credit up to $2,000 per child under Code Section 24(h)(2). Under pre-Act law, the child tax credit provided taxpayers a benefit up to $1,000 per child. The pre-Act law also phased out taxpayers by $50 for each $1,000 of adjusted gross income (AGI) over $75,000 for single filers, $110,000 for married filing joint filers, and $55,000 for married individuals filing separately. These phase out thresholds often kept many taxpayers from receiving this credit. Thankfully, under the new Tax Cuts and Jobs Act, the phase out thresholds have increased to $400,000 for married taxpayers filing jointly, and $200,000 for all other taxpayers. These child tax credit modifications will certainly benefit more taxpayers with qualifying children.

Another benefit of the Tax Cuts and Jobs Act, to help combat the suspension of personal exemptions, is the non-child dependent credit. Under Code Section 24(h)(4) there will be a partial credit worth up to $500 for each dependent of the taxpayer, that is other than a qualifying child. This will likely help taxpayers who have been providing qualifying relatives more than half of their annual support.

These are two small changes included in the Tax Cuts and Jobs Act that could have the potential to reduce your 2018 taxes. The TCJA will certainly impact every taxpayer’s 2018 tax return in one way or another.

If you would like to review what implications the TCJA could have on your 2018 tax return, PFBF CPAs is happy to assist you with your questions. Please don’t hesitate to stop by one of our offices: 259 Front Street, Bath or 46 First Park Drive Oakland.

Nick Deblois is a Staff Accountant at Perry, Fitts, Boulette & Fitton CPAs. He works closely with other senior staff members of the firm, honing his talents regarding tax and accounting matters. He can be reached at  207-873-1603.

Pay Attention When You Get Paid

Over the past couple of months, it has been hard to avoid the noise coinciding with what is formally known as the Tax Cuts & Jobs Act. Now that the bill has passed, and much of that noise has become a reality, the consequences of the reform are impossible to avoid.

While the broader effects of the new legislation are yet to be seen, there are some components of the law that will have an effect on the majority of Americans within the next few weeks.

On January 11, 2018, the IRS released Notice 1036, which serves to update employers on how much federal tax they should be withholding from their employee’s paychecks. Implementation of the new withholding amounts (as adjusted for the new tax landscape) is to begin “as soon as possible, but not later than February 15th, 2018”. To put it simply, this means that many of us will see a change in our take home pay very soon.

You may recall filling out a Form W-4 when you began your employment? That form is what your employer uses to calculate the amount of federal income tax they should remit from your paycheck. Using the updated withholding tables released with Notice 1036, employers will be adjusting their employees’ paychecks to more accurately cover their (new) income tax liability.

Here is what is important to remember: while employers can accurately determine the amount of tax owed based off of the wages they pay their employees, they have no way of considering the other elements that factor into an employee’s tax situation. Taxpayers need to consider a more involved approach at determining what their overall tax liability will be. In order to do so, each of us needs to develop an understanding of the new tax laws, and applicably determine how the new laws will affect them.

Take for example, an employee who gets compensated for mileage. In the past, the compensation was likely included on the employee’s W-2, as taxable income. On their tax return, the employee would pick up the mileage compensation as part of their taxable wages, then deduct the mileage as an unreimbursed business expense on Schedule A. Now, however, as a result of the recent tax reform, that deduction for unreimbursed business expenses is no longer available; meaning that the mileage compensation will still be included as taxable income, but there will no longer be an offsetting deduction. If taxpayers aren’t proactive in making sure that they appropriately adjust their withholdings, they could potentially be in for quite a surprise when they file their tax return in April of 2019.

There has a been a lot of curiosity amongst our clients lately; many of them have been asking us how they will fare under the new tax law. It is not necessary, and it might even be unwise, to wait until you file your 2018 tax return to get your answer. The tax reform act certainly did create change. If you pay federal income tax, it will bode you well to consult your tax advisor sooner rather than later; taking a comprehensive look at your new tax environment now can help you plan ahead.

John Massey is a Senior Accountant at Perry, Fitts, Boulette & Fitton CPAs. He helps individuals and businesses with tax planning preparation and works on compiled and reviewed financial statements for businesses. He can be reached at jmassey@pfbf.com or 873-1603.