Time for a Paycheck Checkup

Now is a good time to check to see how your tax year is going and take action while you have time and eliminate any surprises at tax filing time.

The IRS is urging taxpayers to review their 2019 tax withholdings so any needed changes can be made with your employer as soon as possible. What is a paycheck checkup? It is the review of your withholding to your income level to ensure you are having enough withholding taken out to keep you safe from potential penalties for under payment of your 2019 taxes. A lot of taxpayers were shocked when they prepared their tax returns for 2018 due to the recent tax law changes, along with the reduced tax withholding tables early in the year. This resulted in large tax amounts due with filing their federal returns when in years past they may have had refunds.

While checking your withholding is a good idea every year, there are some situations that make this even more important. Checkups should be done if any of the following apply to you:

·         Owed tax when filing your tax return

·         Had a refund that was larger or smaller than expected

·         Had life changes such as marriage, childbirth, adoption, or buying a home

·         Had changes to your income

Other tax law changes also can have an impact on your refund.

·         Have children and claim credits, such as the Child Tax Credit

·         Have older dependents, including children age 17 or older

·         Changes to your itemized deductions

·         Are a two-income family

·         Have two or more jobs at the same time

·         Only worked part of the year

·         Are self-employed

·         Have high income or a complex tax return

The Tax Cuts and Jobs Act (TCJA) also lowered the tax withholding rates that normally apply to bonuses, back wages, payments for accumulated leave and other supplemental wages. In most cases, the new rate is 22 percent, effective January 1, 2018. This is a mandatory rate without regard to your elections made on your W-4, the form that is used to compute your general tax withholding.

The IRS does have a Withholding Calculator that can be accessed at IRS.gov that can help you make sure you are covered this year. Of course, you can contact Worden Tax Firm to discuss your situation and not only check your withholding, but do some tax planning for 2019 as well.