The Dreaded Tax Man Comes for Families - Are You Prepared?
Published: December 31, 2018
By: Emily Reed
As parents of a newly turned one-year-old, Michael and Karis Watts say filing their income tax returns have not changed much after having a child.
“We weren’t worried about filing with our child for the first time, because we knew we would get a deduction, so I think we were both a little excited about it, to be honest,” Karis Watts says. The Shelby County couple will be filing their income taxes for the second year with a child, and typically use an H&R Block web program to help them file.
The couple doesn’t anticipate having any issues with filing, even with the changes including a new child tax credit. Now, the Child Tax Credit has gone from $1,000 to $2,000 per qualifying child; however, the previous dependent exemption is going away.
According to Cris Nelson, enrolled agent with Essential Solutions, there is a change in the tax code for 2018, which includes an additional benefit on the tax return for parents with dependent children and the increase in the child tax credit.
“The dependency exemption did go away, however, we are seeing that on average, it does not negatively affect the taxpayer,” Nelson explains. “The child tax credit is $2,000 per child, depending on the Adjusted Gross Income. There is also an Earned Income Credit that is available to the taxpayer, depending on their income that increases with the number of children in the household.”
Steve Emerson, CPA with Zippy, says for many parents there isn’t much of a difference when filing, compared to filing without children.
“People usually don’t have problems filing their taxes with children,” Emerson says. “Sometimes we see challenges come up if it is a child that someone had with a previous marriage and they have a divorce agreement. Or you may have one parent of a divorced couple that will claim something they shouldn’t and that can cause some confusion, but for the most part it usually isn’t that different.”
Nelson said taxpayers should always save anything “income related” for the preparation of their return, regardless of if they are filing with children or not. “With the change in the 2018 tax code, many households will not be able to itemize due to the increase in the standard deduction, but that will only be on the federal return,” Nelson explains. “They may still be able to itemize on Alabama returns so they still need to keep their receipts for their charitable deductions, and if they have high medical bills paid out of pocket and all medical receipts.”
Emerson adds that another item parents should know about when filing is that they will need to have social security numbers for both themselves and their children, and parents should have a driver’s license or valid form of identification.
“There has been a lot of identity theft lately, so one way to cut down on that is requiring everyone to show proof of identification,” Emerson says. “Identity theft is a constant problem. It used to be that people would claim dependents on just about anything. Some people even claimed their pets as dependents, or they would claim different family members as dependents, so that has really been cut down on with the requirement of identification.”
Emerson says technology now allows items on tax documents to be checked for issues immediately. “Now, if there is something that is a red flag, it will automatically come back,” Emerson says. “It used to be that with paper filing it would take longer to come back, but nowadays you can pretty much know right away if something isn’t right.”
According to information from Investopedia.com, a child can be claimed as a dependent if they are under the age of 19 at the end of the calendar year and younger than the claimant; under the age of 24 at the end of the calendar year, a student and younger than claimant (of the claimant’s spouse when filing jointly); or any age if the child is permanently and totally disabled.
A common mistake parents can sometimes make when it comes to taxes is not taking into consideration the income that a teenager or college-aged child might be making if they are employed, and how it may affect their own personal return, according to Nelson.
The best piece of advice for new parents filing for the first time with a child is to try and file as early as possible. “Really, it is a good idea for anybody to file as early as they can, but if you are unsure about things as a new parent it is probably best to not wait until the last minute,” Emerson explains. “If there are any issues or if people need additional information about something you can have more time to research or address it, than waiting until the deadline of April 15.”
Both Nelson and Emerson recommend consulting a tax professional regarding any questions about income taxes. For more information about the new child tax credit, or information about filing, visit irs.gov or consult a CPA or tax accountant.
Emily Reed is a freelance journalist. She lives in Alabaster and is a stay-at-home mom to her two children, Tobias and Lucy.