Why Your Tax Withholding Checkup Is a Must This Year

We all have annual medical, eyesight, and dental checkups. But how many of us take the time to do a tax withholding checkup? As a result of the new tax law changes, it is extremely important to conduct a tax withholding checkup this year. And it’s important to do your checkup sooner rather than later so you can avoid any year-end tax surprises.

The Tax Cuts and Jobs Act, passed in December 2017, made significant changes that will affect your 2018 tax returns (that you will file in 2019). As a refresher, these tax law changes include:

Why is a checkup necessary?

The reason we all must conduct a checkup is because the new tax withholding tables assume that your federal tax will be lower in 2018. Thus, less federal tax has been taken out of your paychecks accordingly. However, you may fall into the group of taxpayers that will actually see a tax increase in 2018. If your withholding is not adjusted to account for things like lost credits and deductions, there could be an unwelcome surprise at tax time.

What are the benefits of the checkup?

  1. Checking and adjusting your tax withholding now can prevent an unexpected tax bill and penalties next April.
  2. Projecting your 2018 taxes now, while action can be taken, will help assess your tax cash flow well in advance of next year.
  3. Adjusting your tax withholdings can help you earn a larger paycheck now versus waiting for your delayed refund to come next year.

What can I do as an employer?

For employers, we’d recommend informing your employees about the need to conduct a tax withholding checkup. Why? Because if any of your employees do have year-end payments to the IRS, they will likely ask you why their taxes weren’t properly deducted in their paychecks. Even though it’s not your responsibility to adjust their withholdings, they will still ask you for information. The more proactive you can help your employees be, the better.

How do I check my tax withholdings?

To assess your current tax withholdings and determine if you should make any adjustments, use the withholdings calculator from the IRS to determine your number of allowances. If you do need to update your number of allowances, contact your HR staff to make the adjustment for you.

If you have any questions or if you’d like Cray Kaiser to conduct your tax withholding checkup, please contact us at 630-953-4900.