New Tax Law Changes May Bring An Unwelcome
Surprise Next Year….
Possibly as soon as your next paycheck – you will notice that the amount withheld for taxes on your paycheck calculations will change. The IRS is in the process of updating the withholding tables for 2018 so that they reflect the new tax law changes. It is estimated that over 90% of taxpayers will see bigger paycheck amounts, in fact. Well…all of this sounds good & great…until next spring when you will be in for a BIG surprise next spring when you go to file your 2018 taxes. This is because your refund may very well be smaller than you are used to. Unless, of course, you are proactive! You see, it is very likely that you have not updated your W-4 form in a few (or, in some cases, many-) years, which is used to determine how many deductions you want in place when your company processes the payroll to calculate the amount to withhold from your wages for federal & state income tax payments, SSI benefit withholding, medicare… and all the rest. The 2018 Withholding Table is being adjusted to reflect the larger standard deduction amount change, the lower tax rate, and to repeal the personal exemption component. But, the tables cannot take into account the changes that affect each individual, differently. Taxpayers that are particularly prone to under withholding these funds are those that have large itemized deductions that have been repealed or limited. Other taxpayers that are at risk include employees who have bonuses, stock options and/or commissions because the withholding rate on these have dropped from 25% to 22%.
The Bottom Line:
…is that if you do not adjust your withholding’s via a W-4 Form, you will most likely begin receiving paychecks for a larger amount duringthe course of the year BUT a smaller refund next spring. To rectify or alleviate this occurring you should definitely update your W-4 Form on file with your company’s HR Department. The IRS are also currently developing a new withholding calculator & revising the W-4 Form…said to be available sometime in February 2018. They are anticipating a launch of an extensive campaign with the purpose of better educating the public of such changes. That will be your OPPORTUNITY to “fine-tune” your withholding to best match your desired amount per your terms of take-home pay versus a BIGGER refund when next spring finally rolls around!
Happy Tax Filing! Until next time….