What Are You Withholding?
By Ashley Mowery, CPA
Have you checked your current withholdings lately? No one likes surprises when it comes to paying taxes.
Typically, during your first week of employment you complete a stack of ‘new hire’ paperwork, including a federal W-4 form for income tax withholding. Unless you had a major life event or tax surprise, they most likely haven’t changed since your first paycheck. Now may be an ideal time to review and evaluate your current withholdings due to the new tax law. The changes could mean surprises – good and/or bad – for you and many other taxpayers when filing their 2018 tax returns. Here are a few things to consider:
- Review your paystub: If you’re in a salary position have you compared your old federal withholding to the updated federal withholding? How much did the withholding change? Take the change and multiply it times the number of pay periods. An extra $20 or $40 per paycheck adds up. On a semimonthly pay period that’s $480 -$960 annually. Are you spending that approximately $500-$1,000, how you would like? Or has it been spent as quickly as it entered your bank account.
- IRS withholding calculator: The IRS is encouraging everyone to use the withholding calculator to complete a “checkup.” This tool can assist you with basic situations. Keep in mind this tool is only as accurate as the information you provide. https://apps.irs.gov/app/withh...
- Tax projection: This year you may consider having your tax planner/preparer complete a tax projection for you and discuss the tax law changes for 2018.
Life isn’t stagnant and your income or deductions may have changed so your withholdings may not be as accurate as prior years or when you first completed your new hire paperwork. Finding just the right level of withholding can be a balancing act.
Note: The IRS has issued a draft of the 2019 W-4 which has been redesigned for the tax changes to improve withholding accuracy.
Ashley Mowery, CPA | Manager