As we officially enter the second half of the year, we’d like to remind you to perform a check-up on your tax withholdings. You probably know that many taxpayers were surprised with either reduced refunds or higher taxes due when they filed their 2018 taxes. Why did this happen? Because their 2018 income tax withholding was not sufficient throughout the year.
While the tax reform that came out of the Tax Cuts and Jobs Act (TCJA) went into effect in 2018, the IRS has not yet revised Form W-4 to reflect major revisions that affect withholdings. The IRS plans to issue a revised Form W-4 for the 2020 tax year. As such, employers continue to use the pre-TCJA form which results in lower amounts withheld than the withholdings based on the new law.
The good news is that the IRS website has a tax withholding calculator where you can input your salary and withholdings to date, along with other criteria, to compute your estimated 2019 withholding. Using this tool and updating the W-4 you have on file with your employer can help you avoid any large tax surprises on your 2019 tax return. Alternatively, we can perform a detailed computation based on your 2018 return along with 2019 activity to help you come up with an accurate withholding amount for your specific tax situation.
As always, Cray Kaiser is here should you have any questions or concerns. Please don’t hesitate to contact us at 630-953-4900.