More people than ever are facing an unpleasant shock: lower tax refunds or even a tax bill. This isn’t your imagination. Studies are showing that refunds are down by 8.7%. This isn’t necessarily because tax rates are higher. The main reason is that IRS adjusted the withholding tables to provide for lower withholding due to the slightly lower rates.
Avoiding IRS penalties: If you unexpectedly owe money to the IRS but you can’t pay the tax, file your return or extension by April 15th anyway to beat the 5%-a- month late filing levy. you can apply for an online payment agreement if you owe $50,000 or less in tax, penalties and interest., and you have filed all your tax returns. However, a key point is that IRS is giving partial relief from penalties, even underpayment penalties, under its “first-time penalty abatement program.” If you haven’t been assessed any penalties before you can ask for a waiver of penalties.
Older children can still give you a dependency tax credit: Normally, if you have qualified children who are defined as dependent children under age 17 that you support, you can claim a $2,000 tax credit for each of these kids, although this credit phases out with adjusted gross incomes ( AGI) over $400,000 for couples and $200,000 for all others. If a child reaches age 17 by December 31st then you lose this credit.. period. HOWEVER, what is not well known is that there is now a $500 credit for each dependent who is NOT a qualifying child such as an dependent child age 17 or over. Thus this $500 credit can apply to high school juniors, seniors, and college students, as well as disabled adult children, and even to elderly parents that you support. It does begin to phase out, however, under the same AGI thresholds as the the child credit. So, don’t forget this nice $500 credit for dependent relatives.
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