By Steve HirschbergPublished December 21, 2018 12:00:58The IRS says it can’t be sure if the tax bill the president signed into law will benefit the middle class or the rich.
The agency issued a new rule Thursday that states taxpayers must pay back taxes they owe, or face penalties.
The IRS released a new tax guidance, which says taxpayers can’t claim the deductions they use to lower their taxable income.
The rule applies to all tax returns, and not just the Form 1040.
The new guidance says taxpayers should only claim the tax credits they’re entitled to if they’re able to claim them without penalties.
If the tax credit is based on a pre-tax amount, you’re better off claiming it.
The guidance says if a taxpayer is able to deduct their child’s tuition and books from their taxable tax bill, they can claim the deduction.
But that doesn’t apply to parents or other family members.
If you can’t deduct the child’s expenses, you can claim a credit for the cost of college, for example.
If the deduction is based solely on the cost to a student of tuition and fees at a private university, the IRS said it will penalize taxpayers who claim that deduction.
If it’s based on the student’s parent’s tax bill or wages, the agency said it won’t.
The Trump administration has been cracking down on tax dodging by companies that have paid lower taxes on profits than the government expects.
The White House said Friday it is notifying Congress that it is sending $5 billion in new funds to states and localities for tax reform.