The IRS is reminding taxpayers to check their tax withholding following a tax filing season that resulted in smaller refunds for many.
As a result of the 2017 tax cut legislation and IRS changes in tax-withholding tables, most taxpayers took home more money per paycheck last year, but some found that their refunds were smaller or that they owed money.
Even though the 2017 tax cut legislation increased the standard deduction and child tax credit and cut marginal tax rates, it also ended some deductions, decreased others and eliminated the personal exemption. Many taxpayers who had itemized deductions previously chose to take the standard deduction, which was doubled.
The latest IRS recommendation follows multiple reminders about withholding in 2018 and again earlier this year. In January the IRS announced it was waiving the tax penalty for taxpayers whose 2018 federal income tax withholding or quarterly estimated tax payments or a combination of both was equal to at least 85% of their total tax liability during the year, rather than the usual 90%.
At the time IRS Commissioner Chuck Rettig said, “We realize there were many changes that affected people last year, and this penalty waiver will help taxpayers who inadvertently didn’t have enough tax withheld.” He urged taxpayers to check their withholding to make sure that the right amount of tax is withheld for this tax year.
Now the IRS is telling taxpayers again that “doing a ‘paycheck checkup’ is a good idea,” especially for two-income families and workers with multiple jobs and “taxpayers who adjusted their withholding in 2018, specifically in the middle or later parts of the year.”
“Adjusting tax withholding as early as possible in 2019 is the best way to head off a tax-time surprise next year,” according to the latest IRS notice.
It recommends that taxpayers use the withholding calculator on IRS.gov to check if the right amount of tax is being withheld for their financial situation and have a completed 2018 tax return and a recent pay stub available when they do. Based on the calculator’s recommendations, the taxpayer can then fill out and submit a new Form W-4 to their employer or, if self-employed or holding multiple jobs, adjust their estimated taxes.
A revised estimated tax package, Form 1040-ES, is available at the IRS web site and taxpayers can pay their 2019 estimated tax payments electronically anytime before the final due date for the tax year at IRS.gov/payments.
— Check out IRS Relief for Tax Underpayment: Bloink & Byrnes Go Thumb to Thumb on ThinkAdvisor.