US federal law changes impact wide range of taxpayers US federal law changes impact wide range of taxpayers

US federal law changes impact wide range of taxpayers
31 Aug 2018

Major changes to federal tax law mean that significant numbers of US taxpayers are no longer withholding enough from their salaries to cover their liabilities in 2019.

Diana Manning, a certified public accountant told Forbes: "The problem is instead of getting US$8 back, you're getting US$10 back."

For some, the changes mean they are not withholding enough from their pay packets to cover their taxes in 2019, while others are likely to receive a smaller refund. 

"It doesn't hurt just to go on the website and just check it, just to know where you're at and if you want to be someplace else... you need to have your employer help you with that," Manning advised.

Those most vulnerable to the changes are two-income families, high earners or anyone who itemised their tax deductions in 2017. But Manning said she believes the tax-withholding problem will be fixed next year.

Changes have also been introduced for parents, thanks to a new tax law entitled the Tax Cuts and Jobs Act. While personal exemptions have been removed, the standard deduction has been increased to US$12,000 for individuals, US$18,000 for heads of household and US$24,000 for married couples who file jointly and surviving spouses. As a result, the rise in the standard deduction should help to offset the loss of the exemption, according to KOB4.

But other tax breaks may also available. The Child Tax Credit remains in place and may be worth as much as US$2,000 per qualifying child, depending on income, which is twice as much as before. There is also a US$500 non-refundable credit called the ‘Credit for Other Dependents’. Sometimes referred to as the 'family credit', it enables people to claim for dependents that fail to meet the definition of qualifying child.

 Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

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Major changes to federal tax law mean that significant numbers of US taxpayers are no longer withholding enough from their salaries to cover their liabilities in 2019.

Diana Manning, a certified public accountant told Forbes: "The problem is instead of getting US$8 back, you're getting US$10 back."

For some, the changes mean they are not withholding enough from their pay packets to cover their taxes in 2019, while others are likely to receive a smaller refund. 

"It doesn't hurt just to go on the website and just check it, just to know where you're at and if you want to be someplace else... you need to have your employer help you with that," Manning advised.

Those most vulnerable to the changes are two-income families, high earners or anyone who itemised their tax deductions in 2017. But Manning said she believes the tax-withholding problem will be fixed next year.

Changes have also been introduced for parents, thanks to a new tax law entitled the Tax Cuts and Jobs Act. While personal exemptions have been removed, the standard deduction has been increased to US$12,000 for individuals, US$18,000 for heads of household and US$24,000 for married couples who file jointly and surviving spouses. As a result, the rise in the standard deduction should help to offset the loss of the exemption, according to KOB4.

But other tax breaks may also available. The Child Tax Credit remains in place and may be worth as much as US$2,000 per qualifying child, depending on income, which is twice as much as before. There is also a US$500 non-refundable credit called the ‘Credit for Other Dependents’. Sometimes referred to as the 'family credit', it enables people to claim for dependents that fail to meet the definition of qualifying child.

 Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

OTHER ARTICLES THAT MAY INTEREST YOU

US approves President Trump's controversial $1.5tn tax bill

High earners to gain biggest windfall in Australian budget

China to raise income tax threshold

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