Will Your Withholding Cover Your Taxes?
According to the Government Accountability Office, 2 in 10 taxpayers will owe money to the IRS next year. That means that over 30 million people aren’t withholding enough or not paying enough in estimated payments. Are you?
The amount of federal and state taxes you withhold from each paycheck determines whether you’ll get a refund, break even, or owe taxes when you file your return. The goal is to eliminate any surprises at tax time. Stay on track with these quick steps:
Review last year’s tax return. If you filed your tax return for 2017, take a look at your “total tax” and compare to where you are this year. With the new tax laws, many tax payers may be paying less tax next year. The withholding tables have also taken this into consideration, yet you still may owe.
Estimate your 2018 taxes. Look at last year’s return and project your 2018 tax return based on any known or expected changes in your personal tax situation like: starting a new job with a different salary, a marriage, birth of a child, or purchase of a new home. Our tax advisors can help you determine any deductions that will help you better estimate your taxes.
Assess your current withholding. Check out your last earnings statement or payroll stub to see how much has been already withheld and assess for the remainder of 2018 if it is enough. You can divide the amount you still owe by your remaining pay periods.
Know your tax bracket. While your tax bracket won’t tell you exactly how much you’ll pay in taxes, it can help you assess the tax impact of financial decisions. We can help determine your tax bracket whether you are filing as an individual or jointly.
Complete the new Form W-4 right away. If you decide you need to make changes to the amount currently withheld, do so right away by filling out the W-4 form through the HR department. Reviewing your W-4 is a good practice in any tax year. If not enough is withheld or if you are not increasing your estimated payments, chances are, you’ll owe money come tax time.
Get expert advice and guidance. Our tax experts can help you review your current withholding to determine if it’s the right amount and if additional taxes will be owed. With proper planning, you can keep more of your paycheck, pay less to the IRS, and avoid big surprises at tax time. Contact the office of Jeanine Hemingway, CPA today.