The Internal Revenue Service has published a document providing taxpayers with a basic overview of the key changes they need to know about under the Tax Cuts and Jobs Act.
The document, IRS Publication 5307 – Tax Reform Basics for Individuals and Families, covers topics such as the new tax rates, withholding, standard and itemized deductions, and changes to benefits for dependents. It is specifically geared to individual taxpayers and highlights the changes that taxpayers will see on the 2018 federal tax returns they file in 2019.
Tax rules and regulations are normally very complex and governed by lengthy explanations and descriptions, but the new document is relatively short and does a nice job of highlighting some of the most important changes taxpayers will likely want to know about in a more easy-to-understand language.
Doing a “Paycheck Checkup” for Withholding Amounts
One of the primary features of the document is that under the new tax law, taxpayers may need to adjust their withholding amounts coming out of their paychecks throughout the year to avoid owing too little (or too much) at tax time. The IRS is encouraging taxpayers to do a “paycheck checkup” using the withholding calculator on irs.gov.
After double checking withholding amounts, taxpayers may then need to adjust their withholdings with the IRS Form W-4.
Highlighting Key Points
A nice feature of the IRS publication is that it highlights in orange key points or action items taxpayers may need to be aware of that can quickly be found by scanning through the document. Each one is titled “This means that…”
For example, in the section “Changes to Benefits for Dependents,” there is an explanation of a change to the child tax credit. The “This means that…” orange callout alerts taxpayers to implications of the change to the child tax credit and what it ultimately means to them. In this instance, it reads “more families with children under 17 qualify for the larger credit.”