Jennifer, Here Are Your Articles for Wednesday, July 10, 2019
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Do a Paycheck Checkup

 

Who should do a paycheck checkup? Everyone! But those in the following categories may be especially vulnerable to changes. 

  • Parents who claim the Child Tax Credit.
  • Taxpayers who usually itemized deductions before the new tax reform went into effect.
  • Those who received a large refund or paid a large tax bill before the Tax Cuts and Jobs Act (TCJA).
  • Two-income families.
  • Workers who held two or more jobs during the year. 
  • Self-employed or gig economy workers.

Complicated Situations
Here are some more details for those who may be at high risk for tax adjustments:
Two-income families and people with multiple jobs may be more vulnerable to being under- or over-withheld following the tax law changes. Do a paycheck checkup to determine whether the correct amount of tax is withheld.

If you have children and claim the Child Tax Credit, you could find that your tax refund is significantly larger since the new TCJA. If in the past you found that your income was too high to receive any benefits from the Child Tax Credit, you may now qualify. However, if you're earning more money, you may have hit phase-out limits. Either way, you may need to adjust withholding so you don't have a big bill, or excessive refund, when you file.

If you itemized deductions, you may find that you're not paying enough tax through withholding because the TCJA limits some popular tax deductions you used to claim. Having too little tax withheld could result in an unexpected tax bill or even a tax penalty when you file your next return. During the paycheck checkup, you'll adjust your tax withholding to spread out the additional amount you'll owe over the remaining paychecks this year.

In fact, many people who itemized in the past may not need to anymore, radically changing their tax situation.

If you're self-employed and pay quarterly estimated tax payments, you may need to raise or lower the amount of tax you pay each quarter. 

Any life change — getting married or divorced, buying a home, or having a baby — should make you consider doing a paycheck checkup. In fact, the TCJA limited some popular home-related deductions, so be sure you budget for that.

The mismatch between what you're having withheld from your pay and what you might owe on your next tax return could be significant. You may be overpaying the IRS. If you want your withholding to more closely match your anticipated tax owed, you should file a new Form W-4 with the Single box checked and increased allowances. To make things even more complicated, the IRS is redesigning Form W-4, so keep a lookout for it..

Your best bet is to keep in close touch with us. Don't wait until April is upon you, but reach out now so the next tax season doesn't yield any surprises.

 
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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