How the new Tax Cuts and Jobs Act affects tax credits

This week the Internal Revenue Service began its new tax season in what is often called “pre-Election Week.” We’ll be keeping an eye on how these changes to tax credits play out in this…

How the new Tax Cuts and Jobs Act affects tax credits

This week the Internal Revenue Service began its new tax season in what is often called “pre-Election Week.” We’ll be keeping an eye on how these changes to tax credits play out in this area over the coming weeks, months and, yes, even years.

For now, let’s focus on the Child Tax Credit which is good for kids who are up to 17 in the year they file. The IRS writes up a calculator on its website to help you figure your exact credit.

The Child Tax Credit can be as much as $1,400 per child. Those qualifying to take part in the credit are married, filing jointly, or qualifying for the credit with a dependent. The income of both spouses must be at least $75,000 and can’t exceed $110,000. Parents and dependents must also file a joint tax return and it cannot be used for anyone under 17 or a deceased parent.

The IRS is now extending the opportunity for some taxpayers to apply for an extra $300 because of changes made to the credit. Still others have not yet started processing their returns. Some of those have already started, though.

Although many taxpayers still have more than a few days to work things out before they submit their returns, the IRS has been asking for everyone to file by May 16. In addition, anyone who has received a check in the mail for a credit due from the IRS still must return it by April 15.

Of course, most tax credit decisions will be based on your own situation. But some families may have been shortchanged as a result of the 2017 changes to the law. The Child Tax Credit does not apply to federal income taxes – you can only claim a credit for state and local taxes. And so the IRS admits there were more than 13 million parents who said they qualified for the credit who don’t use the IRS’s calculator to calculate their credits. In addition, the IRS says that some families may not be in a position to file. Some might be unincorporated, unemployed, struggling to keep up with the bills or be single or married with little or no income.

“Our first priority is to make sure the 14 million families can get their children what they deserve,” IRS Commissioner John Koskinen said in a statement released this week. “I have directed my team to work with our taxpayer representatives to help all of them who feel they may have been wronged to come forward and file a claim for a refund.”

This was exactly what Donna Macdonald, a Montclair resident, said she felt she did when she received her refund this week. In her case, the reduction came as a result of the addition of a phaseout of her future claimed credit for $3,000 in 2018 and 2019. Macdonald said she qualified for the same credit in 2012 and 2013, but then her husband was laid off during those years. She said that was when she realized her income made her ineligible for the credit in 2015.

Macdonald says she decided not to file a claim at that time because it would have been much more work. She filed her return then. But this time she was able to use the calculator to find out if she qualified for the credit.

Now she’s working on refinancing the home she and her husband bought 20 years ago. The process could be time consuming. Macdonald said she got to the point where her home appraised for just $60,000 and she had to put $80,000 into a down payment.

Now Macdonald says she appreciates the IRS allowing more time for her to claim her credits. But she still finds herself longing for certainty.

“It just makes no sense why the government should pretend that my kids are too young to be part of this country.”

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