As this filing season begins you need to be aware of two new provisions (that were included in the Tax Cuts and Jobs Act) that go into effect for 2018. One may affect some of your clients that use an ITIN for their children and the other is an addition to the preparer due diligence requirements.
New Requirement for Child Tax Credit beginning in 2018
Beginning with 2018 federal returns in order for a child to be eligible for either the $2,000 child tax credit or the $500 family credit they must have a Social Security Number.
This change was part of the Tax Cuts and Jobs Act that increased the child tax credit (for tax years 2018 – 2025) to $2,000 for eligible children under 17 of which $1,400 may be refundable. Also, the earned income threshold will be $2,500 when calculating the refundable portion of the child tax credit.
A $500 nonrefundable credit was also added for children who are 17, 18, or for full time students ages 19-24 and other eligible dependents.
New paid preparer due diligence requirement for head of household status
Beginning with 2018 federal returns the Tax Cuts and Jobs Act added a requirement that preparer due diligence will apply to tax returns where the taxpayer uses the head of household filing status.
This means that additional questions will be added to the 2018 Form 8867 (Preparer’s Due Diligence Checklist) to ensure that paid preparers are performing their due diligence in determining that the taxpayer is eligible to file using the head of household filing status. Also the $510 penalty for any preparers where the IRS determines that they did not following the due diligence requirements will apply.
See the New Federal Tax Law Changes Included in the Tax Cuts and Jobs Act page in the Tax Resource Center on the Crosslinktax website.
2018 Federal Return and Taxpayer Expectations
January 30, 2019
Reminder of 2018 Itemized Deduction Changes
January 16, 2019
Qualified Business Income Deduction (20% Deduction for Certain Pass-Through Income)
January 9, 2019
Reminder of Form 1040 Redesign
January 2, 2019
Important Reminders for the Upcoming 2019 Filing Season
November 28, 2018
2018 Changes to Form 8867 (Preparer Due Diligence Checklist)
November 9, 2018