Tax reform legislation passed in December 2017 affects almost every taxpayer. The IRS is working closely with partners in the tax return preparation and tax software industries to prepare for tax reform affecting tax year 2018. This ongoing collaboration ensures that taxpayers can continue to rely on the IRS, tax professionals and tax software programs when it’s time to file their returns.

As people prepare to file their 2018 tax returns in 2019, they can visit IRS.gov for answers to their questions about tax reform. Here are several of the resources that will help taxpayers find out how this law affects them:

Tax reform provisions that affect individuals

This is the main tax reform page with information for individual taxpayers. It includes dozens of links to more information on topics from withholding and tax credits to deductions and savings plans.

Tax Reform Basics for Individuals and Families

This publication provides information to help individual taxpayers understand the Tax Cuts and Jobs Act and how to comply with federal tax return filing requirements.

Tax reform resources

On this page, taxpayers can find helpful products including news releases, tax reform tax tips, revenue procedures, fact sheets, FAQs and drop-in articles.

Steps to Take Now to Get a Jump on Next Year’s Taxes

This page has dozens of resources and tools that people can visit now or any time before they file their 2018 tax returns.

Paycheck Checkup

This page has information for people doing a Paycheck Checkup to see if they’re withholding the right amount of tax from their paychecks. Taxpayers can perform a Paycheck Checkup at the beginning of 2019 to make sure their withholding is correct for the rest of the year.

IRS Withholding Calculator

One way in which taxpayers can do a Paycheck Checkup is to use the Withholding Calculator. Checking withholding can help taxpayers protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time.

Taxpayer Advocate

The Taxpayer Advocate Service’s Tax Reform Changes website, available in English and Spanish, explains what is changing and what is not this year for individuals. Its interactive information can be reviewed by tax topic or line by line using a Form 1040 example and is updated to show the new 2018 Form 1040 references.

Tax reform

The main tax reform webpage on IRS.gov features information for individuals, but also takes users directly to info for people who are self-employed. It is also a great resource for anyone who does taxes or accounting for a business or charity.

Share this tip on social media — #IRSTaxTip: Individuals can find answers to their questions about tax reform on IRS.gov. https://go.usa.gov/xE35V.

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WASHINGTON — The Internal Revenue Service issued proposed regulationstoday on foreign tax credits for businesses and individuals.

The 2017 Tax Cuts and Jobs Act (TCJA), legislation passed in December 2017, made major changes to the way the U.S. taxes foreign activities. Significant new provisions include a dividends-received deduction for dividends from foreign subsidiaries and the addition of Global Intangible Low-Taxed Income rules, which subject to current U.S. taxation certain foreign earnings that would have been deferred under previous law.

The TCJA also modified the foreign tax credit rules, which allow U.S. taxpayers to offset their taxes by the amount of foreign income taxes paid or accrued, in several important ways to reflect the new international tax rules. These changes include repeal of rules for computing deemed-paid foreign tax credits on dividends on the basis of foreign subsidiaries’ cumulative pools of earnings and foreign taxes, and the addition of two separate foreign tax credit limitation categories for foreign branch income and amounts includible under the new Global Intangible Low-Taxed Income provisions. The TCJA also modified how taxable income is calculated for the foreign tax credit limitation by disregarding certain expenses related to income eligible for the dividends-received deduction and repealing the use of the fair market value method for allocating interest expense. The new foreign tax credit rules apply to 2018 and future years.

Treasury and IRS welcome public comments on these proposed regulations. For details on submitting comments, see the proposed regulations.

Updates on the implementation of the TCJA can be found on the Tax Reform page of IRS.gov.

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Many people claim the child tax credit to help offset the cost of raising children. Tax reform legislation enacted last year made changes to that credit. Here are some important things for taxpayers to know about the changes to the credit.

• Credit amount. The new law increases the child tax credit from $1,000 to $2,000. Eligibility for the credit has not changed. As in past years, the credit applies if all of these apply:
  • the child is younger than 17 at the end of the tax year, December 31, 2018
  • the taxpayer claims the child as a dependent
  • the child lives with the taxpayer for at least six months of the year
• Credit refunds. The credit is refundable, now up to $1,400. If a taxpayer doesn’t owe any tax before claiming the credit, they will receive up to $1,400 as part of their refund.
• Earned income threshold. The income threshold to claim the credit has been lowered to $2,500 per family. This means a family must earn a minimum of $2,500 to claim the credit.
• Phaseout. The income threshold at which the child tax credit begins to phase out is increased to $200,000, or $400,000 if married filing jointly. This means that more families with children younger than 17 qualify for the larger credit.

Dependents who can’t be claimed for the child tax credit may still qualify the taxpayer for the credit for other dependents.  This is a non-refundable credit of up to $500 per qualifying person. These dependents may also be dependent children who are age 17 or older at the end of 2018. It also includes parents or other qualifying relatives supported by the taxpayer.

More information:

• Publication 972, Child Tax Credit
• Withholding Calculator Frequently Asked Questions
• Tax Withholding
• Tax Reform page on IRS.gov

Share this tip on social media — #IRSTaxTip: What’s new with the child tax credit after tax reform. https://go.usa.gov/xPAMy

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After last year’s tax reform legislation, some S corporations may choose to revoke their S election to be a C corporation because of the new, flat 21-percent C corporation tax rate. Before taking any action, S corporations should consult their tax advisors.

S Corporations and C Corporations are among the types of business structures. A C corporation is taxed on its earnings, and then the shareholder is taxed when earnings are distributed as dividends. S corporations elect to pass corporate income, losses, deductions and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the pass-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.

The Tax Cuts and Jobs Act includes two changes that affect a corporation’s revocation of an S election to be a C corporation:

• The corporation should report net adjustments attributable to the revocation over six years. For more information see Revenue Procedure 2018-44.
• Distributions of cash following the post-termination transition period may be treated as coming out of the corporation’s accumulated adjustments account and accumulated earnings and profits proportionally resulting in part of the distributions being non-dividend distributions from the C corporation. The non-dividend distributions may not be subject to tax at the shareholder level if the shareholder has sufficient stock basis. Additional guidance will be coming.

These law changes only apply to a C corporation that:

• Was an S corporation on December 21, 2017,
• Revokes its S corporation election after December 21, 2017, but before December 22, 2019, and
• Has the same owners of stock in identical proportions on the date of revocation and on December 22, 2017.

For more information, see the Corporate Methods of Accounting topic on the Tax Reform – Businesses page.

Additional resources:
Tax Reform Business Comparison page

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The IRS issued a new publication to help taxpayers learn about tax reform and how it affects their taxes. Taxpayers can access Publication 5307, Tax Reform Basics for Individuals and Families, on IRS.gov/getready.

While last year’s Tax Cuts and Jobs Act includes tax changes for both individuals and businesses, this publication is specifically geared to individual taxpayers. It breaks down the law in easy-to-understand language. The publication highlights the changes that taxpayers will see on their 2018 federal tax returns they file in 2019.

This new publication provides important information about:

• Increasing the standard deduction
• Suspending personal exemptions
• Increasing the child tax credit
• Adding a new credit for other dependents
• Limiting or discontinuing certain deductions

Taxpayers can also go to IRS.gov/getready to find other information about tax reform. This includes the steps taxpayers can take now to help make filing their taxes smoother next year. Following these steps will also help taxpayers avoid surprises when they file their returns.

Share this tip on social media — #IRSTaxTip: New IRS publication helps taxpayers Get Ready for tax reform. https://go.usa.gov/xPyS8

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