The IRS is encouraging everyone to perform a “paycheck checkup” to determine whether you have the correct amount of tax withheld based on your financial situation. The Tax Cuts and Jobs Act made significant changes to the tax law. These changes include increasing the standard deduction, removing personal exemptions, increasing the Child Tax Credit, limiting or discontinuing certain deductions and changing tax rates and tax brackets.
Keith Kenez discusses this topic in our latest episode of "Unique Perspectives - The DGC Podcast."
In February, adjustments were made to payroll withholding tables. However, these adjustments are not “one size fits all.” According to the Government Accountability Office, for 2018 they believe that 73% of taxpayers will have too much withheld from their paychecks, while 21% will not have had enough withheld.
DGC can advise you on what is appropriate for you, and review your year to date paystub to determine whether you are on track for 2018 in terms of withholding. If your main source of tax payment is through wage withholding, we can suggest withholding adjustments or quarterly payments to avoid any surprises in April.
To listen to the entire interview, click here or use the Soundcloud player above.
UPDATE: The IRS announced on January 16th that penalty relief may be available by changing the underpayment threshold from 90% to 85% for the 2018 tax year. This means that as long as 85% of a taxpayer’s 2017 tax liability has been covered by withholding in 2018, the taxpayer will not be subject to any underpayment penalties or interest. Click here for more information.