How to fix your tax withholding for 2019


Loading...

The tax season for the 2018 tax year is just about over, and millions of Americans have finally found out exactly how they fared under brand-new tax laws. Many will see lower tax bills for 2018 than they paid in 2017 and previous years, while some who face the loss of key deductions and exemptions could end up paying more.

Regardless of whether you’re a winner or a loser from tax reform, it’s important to get your tax withholding right. Getting a huge refund at the end of the year is nice, but it means you could have been more comfortable financially over the course of the entire year if you’d wanted. Conversely, if you owe a lot of tax unexpectedly, it can come with interest and penalties, so it’s important to adjust your withholding so you don’t have the exact same problem for 2019. Below, we’ll look at how to fix your tax withholding if you had a problem this year – so that you’ll see your taxes look a lot better by the time the next tax season starts.

Loading...

Get to know the Employee’s Withholding Allowance Certificate

The key to fixing your tax withholding is having the right information on file with your employer. The way that you set up your tax withholding at work is by using an IRS form called the Employee’s Withholding Allowance Certificate. Numbered Form W-4 by the IRS, this form looks deceptively simple, with just a handful of lines that seemingly includes mostly basic information about yourself and your personal and financial situation.

On the Employee’s Withholding Allowance Certificate, the two key numbers you fill out are the number of withholding allowances and any additional tax you elect to have withheld from each of your paychecks. Your marital status also plays a vital role in determining how much your withholding is.

However, coming up with the right number of withholding allowances takes a lot of effort. That’s because there are multiple worksheets you have to fill out to come up with the correct figure:

  • The personal allowances worksheet gives you allowances based on family status and certain tax credits. You get to claim an exemption for yourself, as well as additional exemptions if you file as a head of household or are married and file jointly. Households with just one source of income generally get an extra exemption, and anywhere from one to four exemptions each are available for the child tax credit and the credit for other dependents depending on your income.
  • A worksheet if you itemize deductions, claim adjustments to income, or have additional income from non-work sources can lead to either an upward or a downward adjustment to the number of withholding allowances you claim.
  • If you have multiple jobs or are married and both you and your spouse work, a separate worksheet has very detailed calculations in determining exactly how many allowances to take.

Once you go through all these materials, you’ll have the theoretically right number to put on your W-4. However, as you’ll see below, there are two simpler approaches you can take.

Use the calculator

The IRS understands how hard it is to run these numbers yourself, so it came up with a calculator to do the work for you. You’ll need all the information that Form W-4 asks for, but you won’t have to do any of the calculations. Instead, the calculator will tell you how many withholdings allowances are appropriate based on your answers.

You can access the withholding calculator at the IRS website here. You’ll then take the number of allowances the calculator tells you and put it on the W-4 form.

Make an estimate

If you just finished your taxes for the 2018 tax year, then you know how much you had to pay or what your refund was. From there, you can make a good estimate of how you’ll need to change your withholding allowances to get closer to where you should be.

The starting point to understand is that a withholding allowance corresponds to $4,200 in annualized income in 2019. If you claim an extra allowance, the IRS will withhold as though you made $4,200 less throughout the year, while each allowance you cut will have the IRS withhold as if your annual earnings were $4,200 higher.

So a rough estimate would involve using these steps:

  • Figure out your marginal tax bracket – the rate at which your highest earnings got taxed.
  • Multiply the tax rate by $4,200 to get the approximate tax value of each allowance.
  • Divide your refund or tax bill by that calculated tax value. If you got a refund, increase your withholding allowances by the result. If you owed tax, decrease your allowances accordingly.

This method won’t necessarily get things perfect. But you should see your paychecks change, the amount you owe or get back in a refund should get closer to zero.

Act now

Because withholding uses assumptions based on annual figures, the earlier in the year you fix your withholding, the better it’ll be. By following this simple guide, you’ll put yourself in a better position to get closer to matching up your withholding with your eventual tax bill.

 

Source:- usatoday

Loading...

Register Form

Name
Email Address
Phone No