Paycheck Checkup: Review Your Withholding for 2019
An unexpected bill around tax time is something that every taxpayer wants to avoid. That is why we encourage our clients to routinely perform a paycheck update and reevaluate their federal income tax withholding each year. This is especially important for the 2019 tax year as it is the first time that the new withholding tables will be used for the full twelve months of the year.
Thankfully, performing this paycheck update will be easier to do than in previous years due to the new IRS Tax Withholding Estimator. The new estimator is a huge improvement over the old Withholding Calculator which was confusing and simply didn’t work for many taxpayers. The new estimator presents taxpayers with more options when entering different sources of income. Previous iterations of the IRS Withholding Estimator lacked this feature and caused those who were not the standard W-2 filer to have issues when trying to properly estimate their withholdings. The user interface of the new estimator is also greatly improved, making it easier to use and understand for the average taxpayer.
You will need your most recent pay stub in order to use the estimator. Make sure this also shows the total amount of federal income taxes that has been withheld for the year. You may need other documents depending on your other sources of income. Remember that the results are entirely dependent on the accuracy of the information that you enter into the estimator. Ensure that your information is accurate to achieve the best withholding estimate.
Once you complete the 5 steps that are required in the estimator, you will be given results that show whether you will owe tax at the end of the year or be owed a refund at the end of the year. The estimator also provides instructions on how to adjust your results in order to get your balance owed close to zero or to increase your expected refund amount. This will require you to complete a new Form W-4, but the estimator provides helpful instructions that will allow you to reach your desired estimated balance.
While the new estimator is much easier to use, you may still have questions regarding your withholding estimates for the 2019 tax year. If this is the case, don’t hesitate to contact us at KTLLP so we can assist with the process.