Are You Having Enough Withheld From Your Payroll Taxes?
After a great deal of hoopla regarding the 2017 Tax Cuts and Jobs Act, the reality of who benefited started to hit home in 2018.
According to a CNBC article last year, 30 million people may not have withheld enough taxes through their payroll withholding.
If you were one of them, you had to pay additional taxes. Never a welcome prospect. The same may be true for 2019.
There is Still Time to Make a Change
Evidently, the IRS is concerned enough to have developed an updated tax table estimator to address the concerns of workers, retirees, self-employed individuals and a number of others who need to review and perhaps adjust the amount of income tax that is withheld from their wages and pension payments.
It isn’t too late to make the change but doing so in the last quarter of the 2019 tax year may cause you to feel the pinch.
While the IRS is urging anyone and everyone who receives a paycheck to do a Paycheck Checkup, the tool itself has its quirks. Especially for workers who may not receive the same amount of money in each paycheck, or for those who receive income from more than one source.
Georgia Rogers, E.A., the owner of ProActive Tax Solutions is sharing with clients that, “This simple tool is designed for individuals who want to monitor their withholding to date, based on their projected yearly income. We walked one of our clients through the Tax Withholding Estimator online tool and discovered something interesting.”
“In one section, they ask you to enter the withholding amount from your last paycheck. In this instance, the client only showed an amount of $35. So, we entered that and continued through the other questions. They included, among others, what is the total yearly amount you expect to earn, which was approximately $120,000. Another question involved the withholding to date which was over $18,000.”
Use Common Sense
“If you take the tool at face value, with an estimated projected income of $120,000, and a weekly payroll tax deduction of $35, the calculation show that you would owe an additional balance of close to $7,000, says Rogers.”
Taken at face value, if you were the person using the table, you might jump to the conclusion that you would need to increase your payroll withholding amount by hundreds of dollars.
“However, Rogers continued, “when we divided the federal withholding amount of $18,000 by 31 weeks, the number of weeks in the year we’d reached to date, the average amount of withholding turned out to be about $580 a week.”
“When we went back and plugged that figure in, it was clear that our client would have enough withheld to ensure that no additional taxes would be needed. Why? Because this person works on commission and that one paycheck where the client only had $35 withheld had to do with a small commission payment that week.”
Local Help Calculating Your Tax Bill
If you received an unexpected tax bill last year or had a major life change this year, this tool can help you calculate your tax liability. Life events that may affect your withholding are important to consider.
Did one of your dependents age out this year? Or did you marry or have a child? Did you experience a divorce or a death in the family? Any of these life events will impact your withholding.
If you aren’t sure of all the elements to consider, or you’d just like a trusted professional to guide the process, we can help you while there is still time to make adjustments to your withholding. Our offices are conveniently located in Corte Madera. Appointments are available now by calling our front desk at 415-924-6240.