Should I Change My Withholdings for 2019?
If you are employed, then your employer takes the information from your Internal Revenue Service (IRS) Form W-4 and applies it to the IRS’s withholding tables to determine the amount of income tax to withhold from your wages in each payroll period. Those tables remained fairly consistent for decades, and people came to expect a certain tax result. The Tax Cuts and Jobs Act, effective for the 2018 tax year, turned that expectation on its ear. One of the key impacts of the Tax Cuts and Jobs Act was an overall change in tax brackets and rates, which caused the Internal Revenue Service to update their withholding tables to account for the new rates.
This process did not work all that well in 2018 because, in the wake of the tax reform, the IRS did not have adequate time to properly redesign Form W-4 and adjust its withholding tables. In fact, the IRS has announced that this task will not be completed until it issues the 2020 versions of Form W-4 and the withholding tables. To add further complexity, the new withholding tables were only in effect for a portion of 2018, and they cannot account for the impact of tax reform on your personal situation, so other factors that may influence your return, such as whether or not you continue to itemize deductions and whether or not you are eligible for certain tax credits, can have a significant impact on the appropriate level of withholdings.
Now is the time to be proactive and make sure your withholdings are where you want them to be for 2019. Let us know if you’d like us to review your situation and current withholdings to make sure you’re on track.
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