Georgia taxpayers will need to get ready for the new W-4 form that the IRS is rolling out for next year. The government agency says that the goal of the new form is to make sure that taxpayers owe as little as possible at the end of they year. Ideally, neither the government or a taxpayer will owe the other any money at tax time. However, the new form will require taxpayers to provide more information.
Taxpayers in Georgia and anywhere else who don't pay their federal income taxes on time could be subject to IRS collection activities. The first step in the process is to send a letter detailing how much the government thinks is owed. Typically, the balance will include penalties and interest in addition to the principal balance. The next step in the process may be to file a lien, garnish wages or seize other assets to satisfy the debt.
College students who participate in a paid internship in Georgia or any other state may owe federal taxes on their earnings. This could be true even if participation in the internship is required by the school. In some cases, individuals are paid as independent contractors, which means that they will receive a Form 1099 as opposed to a traditional W-2. The difference is important as it determines how much in FICA taxes an individual is required to pay.
Tax time can be particularly challenging for people in Georgia who are dealing with the burden of tax debt. People may find themselves with tax bills that they are unable to pay, and they may not be sure how they can find a way out of the situation. As 2018 opened, there were over 14 million open cases involving tax debts for individuals and businesses, even though the IRS has cut its tax liens filed each year by over 50 percent since 2010. The American economy has grown in the past 10 years, but many people still face significant tax debt.
Georgia residents may need to get familiar with a series of new forms when they complete their tax returns this year. This may apply to those who are self-employed and made more than $400 from such activity. If so, they will need to pay self-employment tax and report it on line 57. However, the actual calculation of that tax takes place on Schedule SE.
The federal tax overhaul that went into law in 2017 has exposed many taxpayers in Georgia and around the country to unexpected income tax bills. According to the Government Accounting Office, roughly 3 million more people than last year will have failed to withhold sufficient income taxes from their paychecks to avoid owing when they file their 2018 federal tax returns. One tax accountant explained that entitlements to withholding allowances that people had grown to expect were reduced. This translated into people not having enough money taken out of their paychecks. The loss of some itemized deductions have also produced higher tax liabilities.
While the tax law has changed in recent years, there are still many deductions that Georgia residents may be entitled to in addition to the standard deduction. For example, it may be possible to take a deduction for student loan interest up to $2,500. This is true for single filers who have a modified adjusted gross income of $80,000 or less. The amount increases to $165,000 for married couples filing jointly.
Georgia residents may have heard that the new Form 1040 is going to be shorter than previous versions. This was one of the benefits touted by those who supported the Tax Cuts and Jobs Act (TCJA). However, taxpayers should be aware that there are six schedules that could need to be attached to the new form. Individuals who owe self-employment taxes or tax deductions or who need to pay the alternative minimum tax (AMT) will have to go through this process.
At some point, Georgia retirees must start taking distributions from their retirement savings accounts. The IRS mandates that individuals must start taking these distributions starting in April of the year after turning age 70 1/2. Furthermore, they must calculate and abide by their required minimum distribution. This amount is based on how long a person is expected to live as well as their account balance at the end of the previous year.
Obtaining head of household status can be a boon for divorced parents who meet the criteria for it. Among the benefits is a standard deduction of $18,000 as opposed to $12,200 for those who file single. Furthermore, individuals who have the head of household status can claim a $2,000 child tax credit. Unlike a deduction that reduces a person's taxable income, a credit actually reduces what a person owes by the amount of the credit.