Each Labor Day weekend John Kasperek Co., Inc. provides an annual reminder about the importance of year-end tax planning with helpful tips and tax updates for consideration. If you are like the thousands of Americans who will owe taxes and will have difficulty finalizing your returns in light of the tax reform initiated by the Tax Cuts and Jobs Act (TCJA), the Internal Revenue Service (IRS) has provided some helpful recommendations this year.
Taxpayers who haven’t yet checked their withholding recently should do so ASAP. All taxpayers can do this by using the new mobile-friendly Tax Withholding Estimator. The IRS encourages everyone to use the Tax Withholding Estimator to perform a quick “paycheck checkup.” This new tool can be used by workers, as well as retirees, self-employed individuals and other taxpayers. It’s a user-friendly step-by-step tool to help you effectively adjust the amount of income tax to withhold from wages and pension payments. This will help ensure that you are paying the right amount of tax as you earn income throughout the year, as well as provide you with a better understanding of your tax obligations under TCJA.
Who should do a Paycheck Checkup? Though doing a Paycheck Checkup is a good idea every year, for many people, it’s even more important this year. This includes anyone who:
- Expected to owe less tax or get a bigger 2018 tax refund.
- Has a major life change this year such as having a child, has a dependent older than 17, or has a relative who has become a dependent.
- Has a two-income family.
- Has two or more jobs at the same time or only works part of the year.
- Claims credits like the Child Tax Credit.
- Itemized deductions in the past.
- Has high income or a complex tax return.
Another option for taxpayers with more complicated situations are the worksheets and special instructions in Publication 505, Tax Withholding and Estimated Tax. This includes those who expect to receive long-term capital gains or qualified dividends, or employees who owe self-employment tax, alternative minimum tax or tax on unearned income of minors.
Anyone who needs to make a withholding change should do so as soon as possible. This will allow withholding to be spread evenly throughout the rest of the year. Also, for those who adjusted their tax withholding in the middle or later part of 2018, it is important to check again this year to make sure that over or under withholding is not occurring.