James C. DeRidder, BridgeTower Media Newswires
Now that most of us have filed our 2018 tax returns, did your tax situation turn out as you had expected? If not, now is the time to do a paycheck checkup using your recently completed 2018 tax return and the IRS withholding calculator. It is a good idea to do a paycheck checkup every year, but with the tax law changes made in the Tax Cuts and Jobs Act (TCJA) enacted in December of 2017, and a change to the withholding tables in 2018, it is even more important than ever.
Some of the things that affected many taxpayers as a result of TCJA included lower tax rates, increased standard deductions, elimination of personal exemptions, increased child tax credit and limited or eliminated deductions. As a result, taxpayers are encouraged to check their withholdings, even if they did a paycheck checkup in 2018.
This includes taxpayers who:
• Have children and claim credits, such as the Child Tax Credit;
• Have older dependents, including children age 17 or older;
• Itemized deductions in the past;
• Are a two-income family;
• Have two or more jobs at the same time;
• Only work part of the year; and
• Have high income or a complex tax return.
Even without the changes made by TCJA, anyone that had the following would be advised to do a checkup:
• Adjusted their withholding in 2018 — especially those who did so in the middle or later part of the year;
• Owed additional tax when they filed their tax return this year;
• Had a refund that was larger or smaller than expected; and
• Had life changes such as marriage, childbirth, adoption, buying a home or when income changes.
Now is the best time to do a checkup on your withholding, since a completed tax return is useful when using the withholding calculator on IRS.gov. Taxpayers will need to estimate deductions, credits and other amounts for 2019, so having similar information from the 2018 return can make using the withholding calculator easier. It is also important to have your most recent paystubs handy, and to remember that the calculator’s results are only as accurate as the information you enter.
You can find the IRS calculator at IRS.gov/withholding, and if after you do the paycheck checkup you decide to change your federal withholding allowances, you can find a new Form W-4 at IRS.gov/pub/irs-pdf/fw4.pdf.
Now that you have gone though the process of doing a paycheck checkup for your federal withholdings, what if you live in the great state of New York? While many people would think that they would use the same number of withholding allowances as the number claimed on their federal Form W-4, this is generally not the case.
While doing a paycheck checkup may tax a little time, hopefully you will be able to make the necessary changes so that you won’t have any big surprises come next tax season.
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James C. DeRidder, CPA, is a principal with Mengel, Metzger, Barr & Co. LLP. He can be reached at JDeridder@mmb-co.com.
