Susan Tompor Detroit Free Press
Published 4:54 p.m. UTC Aug 1, 2018
Don’t look now, but you could soon owe money to the U.S. Department of Treasury in April because you’re taking too much cash home now.
Seriously. We’ve been warned before and we’re being warned once again. So if you’ve been dragging your feet about maybe having more money withheld from your paycheck, now is the time to do something.
The Internal Revenue Service has a withholding calculator at www.irs.gov to do a quick “paycheck check up.”
It’s August. Any move you make now to have more taxes withheld from your paycheck can still help you pull fewer dollars out of your savings or checking account for an unexpected tax bill due in April.
The Government Accountability Office outlined some of the challenges in a July report involving the new payroll withholding tables. The tax rules changed dramatically after the tax reform package that rolled out of Washington last December.
Now, there’s some question on how well revised withholding tables for 2018 being used by employers now reflect what you’re going to owe in taxes in 2019.
The GAO report noted that the IRS has warned taxpayers earlier this year to take a look at the paycheck withholding calculator. The IRS also used social media, including Twitter and Facebook, to promote a national “Paycheck Checkup” campaign.
And the IRS posted seven YouTube videos related to assessing withholding for 2018.
So it’s important to review your own information relating to withholding taxes based on your own personal situation. How many kids do you have? How many jobs are you holding down at different companies? Did you itemize deductions last year? All these questions could impact what you need to have withheld. See www.irs.gov/withholding.
To use that calculator, you need:
- To estimate your 2018 income, the number of children you will claim for the Child Tax Credit and Earned Income Tax Credit, and other items that will affect your 2018 taxes.
- Gather your recent pay stubs.
- Have your recent income tax return handy.
- Important note: You’re not giving your name, Social Security number, address or bank account numbers on the IRS withholding calculator.
About 30 million Americans — or 21 percent of taxpayers — are not withholding enough to cover the taxes dues, according to a simulation listed in the GAO report. That’s up from 18 percent if the tax laws had not changed.
About 73 percent of taxpayers with wages are having too much taxes withheld and would receive a refund, based on simulations run by the Treasury Department. That’s down from 76 percent if the tax laws had not changed.
Major changes in the federal tax law that went into place in 2018 make it necessary for many taxpayers to re-evaluate their paycheck withholding. Remember, we saw bigger paychecks in February.
Who is likely to be vulnerable here? And who really needs to take action?
Two-income families; a family with older dependents, including children 17 or older; or you itemized deductions in 2017 — including some with vacation homes Up North.
Families with several children can find the new rules to be more complicated and could face a higher tax bill in 2019, especially if a few of the children are age 17 or older.
Households with high incomes, homeowners who live in high property tax states and those with complex tax returns are urged to take a second look at their withholding amounts, too.
So maybe pull back and put down that wallet before you rush out to splurge on school clothes or a late summer trip. Take a look at that tax withholding calculator first — and talk to your tax professional.
Contact Susan Tompor: [email protected] or 313-222-8876. Follow Susan on Twitter @Tompor.
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