New Tax Provisions in Effect

Before you forget about taxes for another year, the IRS says you should know about some law changes now in effect. Start planning now for these provisions which will affect many taxpayers filing their 1989 income tax return next filing season.

On 1989 returns taxpayers claiming a dependency exemption for a child who will be two years old by the end of 1989 will need a social security number for the child. Previously this requirement applied to children age five or older. Taxpayers should apply for their child's social security number by filing Form SS-5 with the Social Security Administration.

The IRS also noted there is another important change in the rules for claiming dependency exemptions -- this one concerning a child who is a full time student. Beginning in 1989 you may not claim a dependency exemption for a child that is 24 years old by the end of 1989 and had income over $2,000, even though the child was a full time student. Previously, there was no age or income limit if the child was a full time student. The IRS said that taxpayers affected by this change may want to consider adjusting their withholding by filing a new Form W-4 with their employer.

New rules now apply for working people who claim the child and dependent care tax credit or exclusion for employer provided dependent care assistance as well as for the child and dependent care providers. Beginning in 1989 care providers are required to give their taxpayer identification number (TIN) to any client who wishes to claim a tax credit or exclusion. Also, taxpayers claiming the tax credit or exclusion must put the correct name, address and TIN of the care provider on their 1989 income tax return. The IRS has developed Form W-10, Dependent Care Provider's Identification and Certification, for taxpayers to use when securing this information from care providers. This form is available at IRS offices or by calling 1-800-424-3676.

The IRS also reminded taxpayers who are eligible for Medicare Part A, that a supplemental Medicare premium must be computed and paid with their 1989 federal tax return. According to the IRS, these taxpayers should consider either increasing their federal estimated tax payments or their withholding to cover the premium. However, the IRS noted that for 1989, no estimated tax penalty will be charged based on underpayments of the supplemental premium. Additional information is contained in Publication 934, Supplemental Medicare Premium, available at many IRS offices or by calling 1-800-424-3676.

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