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  • Tax Law Has Changed - Are You Sure You Are Withholding Enough Tax?

    The Tax Cuts and Jobs Act has made significant changes to the tax code.  As a result, your tax liability may also change significantly from 2017 and the withholdings you had in place for 2017 will likely not suffice for 2018.  Below, is a small sample of changes made to the tax code:

    • New tax rates and brackets
    • Higher standard deduction
    • No personal exemptions
    • Higher Child Tax Credit
    • Limitation/elimination of multiple deductions

    You will want to do a “withholding checkup” and evaluate whether your withholdings are correct or whether you are paying in too little or too much.

    You are especially encouraged to do this checkup if your home is a two-income home and if, either you or your spouse, work multiple jobs.  Oftentimes, both spouses will both account for the same credits and deductions when calculating their withholding, which results in too little tax being withheld.  Life changes also make re-evaluation of tax withholding necessary.

    If you want to evaluate your tax withholdings, the IRS provides an app to help you determine the correct amount of withholding for 2018, which we have linked to below. 

    Before accessing the app, you will want to have the following information:

    • Estimate of your 2018 wage income plus any bonuses you will receive
    • Total withholding for the year for both you and your spouse
    • A copy of the most recent paycheck for both you and your spouse
    • Unemployment compensation received
    • Tax-deductible IRA contributions you have made or will make
    • Medical/dental expenses, state/property taxes paid, home mortgage interest, and gifts to charity (if you think the total will exceed your standard deduction)

    You will also want to re-confirm eligibility for the Child Tax Credit and Earned Income Credit.

    If there is a change in your life situation after making adjustments to your withholding, be sure to come back again and evaluate your withholdings, as your revised withholding may no longer be sufficient.

    If you have a complex tax situation which includes investments and business income, we do not recommend that you use the IRS withholding calculator; but, instead call us so we can help you determine correct estimated payments or withholding in light of the tax law changes.

    You may access the IRS’s withholding calculation app from their website here.

    Jake Schwartz | 07/26/2018

    Days until April 15

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