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.
►Make it easy to keep up to date with more stories like this. Download the 13 ON YOUR SIDE app now.