Getting A Balance on Withholdings

        Many people anticipate getting a large Tax Refund after filing their Tax Return. However, the IRS has run a very detailed campaign on Social Media trying to get the attention of Taxpayers and Tax Professionals over the past year. The goal was to create awareness of how certain features of the Tax Cuts and Jobs Act (TCJA), would impact the income of employees. The IRS wanted everyone to check their withholding amounts to make sure they were correct. We are now starting to see why.

          When the TCJA was applied last year, it adjusted the withholding tables for paychecks. The encouragement was to check and see how your paycheck was affected. Many saw an immediate increase in their take home pay and may not have seen the need to investigate further. As a result of that and the reduction of Federal income tax rates, some are finding out that they were underpaying on their taxes for a portion of 2018. The penalty for this will be waived if they paid 85% of their tax obligation.

          The majority are going to find that they will have a smaller Tax Refund. This is a result of having new withholding tables and Federal tax rates. This meant that many tax withholding amounts were closer to 100% of what was required, creating smaller refunds. The sweeping changes of the TCJA impacted every area in the tax and financial landscape. Some of the changes are only now becoming manifest. Look at your Form W-4 to see if changes need to be made to make your withholding amounts accurate.

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