Review Tax Withholding Now To Avoid Unwanted Surprise in April

As you begin to calculate the appropriate amount of withholding, keep in mind the effect of your marital status on your tax filing, and have your 2018 tax return and a current paystub on hand.

Armed with this information, I suggest you access www.IRS.gov and look at a feature called the Tax Witholding Estimator, which includes a tool called a Paycheck Checkup. 

The Paycheck Checkup tool walks users through a series of questions regarding their specific tax situation, and the results help determine whether they might want to file a new Form W-4 with their employer.  The tool is designed to help users target a tax-due amount close to zero or a refund amount.

There are two cases in which a new W-4 should always be filed.  One, of course, is when you start a new job.  The other is if you have a change in marital status. 

You might also consider changes in your withholding amounts if you have a change in the number of your dependents or a change in in deductions, such as the amount of mortgage interest payments or charitable contributions.   This is an area that confused many people last year when there were significant changes to the standard deduction calculations.

It’s always best to review your calculations with your tax professional, and now is a good time to do so before they become extremely busy leading into the April filing deadline.  For changes in payroll deductions, file a new W-4 with your employer.  For changes in Social Security withholding, contact the Social Security Administration.  For changes in withholding on income from pensions, contact the custodian or administrator of the pension fund.

Your tax professional can also help in other circumstances, such as if you’ve sold stock and realized capital gains upon which you will have to pay taxes.  In such cases, you may want to consider making estimated income tax payments during this year.