Check Your Withholding NOW
Congressional auditors are reporting that approximately 30 million taxpayers—21 percent of U.S. taxpayers—are likely to face a larger tax bill when they file in 2019 because too little was withheld from their paychecks.
You likely noticed an increase in your paycheck earlier this year when your employer began using the new tax withholding tables that the government put together in response to The Tax Cuts and Job Act. But many taxpayers may end up being “under-withheld” because of complications in the new tax law that may not have been taken into account when using the tables to estimate workers’ tax obligations.
The IRS is urging all employees, especially high-income earners, two-income families, folks who work multiple jobs, and those with complex tax returns to complete a “paycheck checkup” to verify that they’re withholding the right amount of tax from their paychecks. This is important every year, but especially this year, as the tax reform package may have changed your situation.
The IRS and LSWG recommend that you:
- Go to the IRS Withholding Calculator on IRS.gov to perform a “paycheck check-up.”
- Check your status regarding the following items: the increased standard deduction, the elimination of personal exemptions, the increased child tax credit, other limited or discontinued deductions, and changed tax rates and brackets.
- If you need to adjust your withholding, submit a new Form W-4 to your employer. This is the form that tells your employer how much to withhold from your paycheck.
As of this date, states have not addressed how the new federal tax law will affect state taxpayers. We suggest you also look at your state tax situation because the new federal tax law could impact your state and local taxes, as well. For example, your state tax liability may change as a result of whether or not you itemized deductions on your federal return.
Does this sound confusing? It is, this year more than any in recent memory. If you’re unsure what your status is or your situation is too complex for the IRS Withholding Calculator, give us a call here at LSWG and we will help you figure it out.
LSWG also reminds you to be on the alert for tax scams and cyber criminals impersonating the IRS—especially via email or phone. The IRS does not send emails related to the calculator or the information entered in it.
We are staying on top of these issues and will do our best to keep you informed of changes as they develop and how they may impact you. Call us at 301.662.9200 (Frederick) or 301.738.8400 (Rockville) if you would like to discuss.