Reminder to Review Your Withholding
Were you surprised with such a small refund, or worse yet you unexpectedly had to write a check on April 15th? If the answer to this question is yes, and you have not yet adjusted your federal income tax withholding, the impact may be even greater for the 2019 tax year. This is because the new withholding tables will be in effect for all twelve months, versus about nine months for 2018.
Last summer, we urged our clients to review their federal income tax withholding, shortly after the IRS released the new withholding tables. We are reminding you again now of the importance of evaluating your withholding.
Taxpayers most likely to be negatively affected by the 2018 withholding tables included households with two wage earners, individuals with multiple employers, and taxpayers affected by the new rules on itemizing. This current version of Form W-4, which is used to update your withholding amounts, is just not capable of accounting for all of the changes brought about by tax reform.
The IRS has been working on creating a new Form W-4 which will be more aligned with the changes brought about by tax reform. A draft version is expected by the end of May, with a second draft planned for later this summer. The final version will be released by the end of 2019 in time to use for the 2020 tax year. You can expect the new Form W-4 to be significantly more complex than the current version.
The IRS does have a withholding calculator available on its website to assist you in completing Form W-4. The calculator is available at www.irs.gov/payments/tax-withholding. In order to use the calculator you will need to have your most recent pay stubs and be able to answer questions about your estimated 2019 income.
Alternatively, your tax professional at Ketel Thorstenson can perform the calculations for you. You will need to provide us with your most recent paystubs and inform us of any family or tax changes that may affect your 2019 tax situation. Now is the time to evaluate your federal withholding to avoid surprises next April. Contact your KTLLP tax professional today at 605-346-5630 for assistance.