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It's time for a paycheck check-up!

Chris Harper, CPA, MBA shows us what to look for now to avoid surprises later.

GRAND RAPIDS, Mich. — In this edition of Smart Money, we're taking a good, hard look at our paychecks! Chris Harper, CPA, MBA shows us what to look for now to avoid surprises later.

Tax Reform Continues to Impact Taxpayers

  • The Tax Cuts and Jobs Act initially impacted taxpayers beginning in 2018.
  • Taxpayers may have adjusted withholding during the middle or latter part of 2018.   
  •  It is wise to revisit withholding at least annually.
  •  Taxpayers can adjust withholding by filing new Forms W-4 if necessary.
  • Taxpayers may be subject to underpayment penalties if payments are insufficient relative to their annual tax.

Taxpayers Who Should Pay Particular Attention

  • Those who owed tax with their 2018 return.
  • Taxpayers whose 2018 refund was significantly different than expected.
  • Those who have had major life changes such as the following: Marriage, divorce, or death in the family; Birth or adoption of a child; Purchase or sale of a home; Retirement or other change in employment circumstances; Entering or graduating from college
  • Taxpayers with significant non-wage income (e.g. interest, dividends, business income, self-employment income, capital gains and prizes)
  • Two-income families
  • Taxpayers with two or more jobs
  • Households with significant income or complex tax returns.

Evaluate Your Withholding Now!

  • Some taxpayers may owe tax with their 2019 returns.
  • Receiving a massive refund also may not be the best strategy.
  • Check your withholding now so you have a few months to make adjustments if needed!

Visit the IRS’ “Paycheck Checkup” web page for the following resources: 

Some taxpayers may need to pay quarterly estimates using Form 1040-ES.

A comprehensive tax projection prepared by a CPA is your best line of defense to mitigate unpleasant surprises. This may be more important now than ever!

Taxpayers with complicated situations should at least consult IRS Publication 505

  • Be sure to revisit your 2020 withholding early in 2020 if you made major changes in 2019.
  • Also, be sure to evaluate state and/or city withholding if necessary.

Information courtesy of Chris Harper, CPA, MBA.

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