Update Your Withholding Now to Avoid Surprises Next April

As you know, the government recently enacted the Tax Cut and Jobs Act, which made some sweeping changes to the federal income tax—and will certainly affect your individual income tax return next year.So now’s the time to do some homework and possibly provide your employer with a new W-4, Employee’s Withholding Allowance Certificate, to change the amount withheld from your paycheck for federal income taxes.Withholding the correct amount of tax can greatly assist in your annual budget planning, prevent an unpleasantly large tax bill, and possibly provide you with more take-home pay each pay period.Wondering whether your 2018 paycheck will result in the right amount of taxes? Check it out yourself: the IRS recently released an updated Withholding Calculator, reflecting new tax law changes. Note that this simply serves as a calculator so you won’t need to enter any personally-identifiable information, and no information will be saved.Before you begin to calculate possible changes, be prepared. Gather your most recent pay stubs and tax return. To determine the right balance for your federal withholding, be familiar with the employee allowance guidelines:

• You’re entitled to one allowance for yourself and one for your spouse.
• If you’re filing as “head of household,” you’re allowed one allowance.
• You can claim an additional allowance if:
  • You’re single or married filing separately and have only one job;
  • If you’re married filing jointly, have only one job, and your spouse doesn’t work;
  • If your wages from a second job or your spouse’s wages (or total of both) are $1,500 or less.
• If you claim additional dependents, you may be entitled to more allowances.

If the calculator indicates you need to make changes to your withholding, complete and submit form W-4 to your employer as soon as possible. Don’t send form W-4 to the IRS. Remember, the new withholding rates will not affect your 2017 return (filed in 2018).If you have a more complicated tax situation, such as self-employment tax, long-term capital gains, or other complexities, this calculator probably isn’t for you. Instead, look for the IRS’ Publication 505, Tax Withholding and Estimated Tax, to be updated in early spring.For more than three decades, Patrick & Raines CPAs has been privileged to provide complex individual and business tax return services and small business advice to help build your future.For your tax planning and preparation, assurance needs, accounting services and more, contact us at Office@CPAsite.com or 904-396-5400.