Wolters Kluwer Emphasizes the Importance of Employees Reviewing W-4 Income Tax Withholding
What: The new income tax withholding tables are out — implementing the changes made by the 2018 Tax Cuts and Jobs Act. Key changes include a reduction in tax rates, an increase in the standard deduction, elimination of personal exemptions, and an increase in the Child Tax Credit.
Why: The new withholding tables were not required to be implemented by employers until the end of February, 2018. As a result, employees should review their 2018 Form W-4 income tax withholding status to ensure that they are not over- or under-withholding, which could result in a possible interest-free loan to the government or tax penalty at the end of the tax year.
Conducting a W-4 review allows employees to adjust other withholding allowances based on factors such as single or married status, number of jobs, number of dependents, child care expenses, other deductions. Employees can also request to withhold additional sums from each paycheck.
Here are some steps employees can take to review their income tax withholding:
- Review 2018 paystubs to adjust withholding taken out before and after February, 2018
- Perform a paycheck checkup to determine correct tax withholdings for the remainder of the year (consult a withholdings calculator)
- File a revised W-4 with to adjust withholding to more accurately reflect current tax situation
- Consult with a tax advisor to discuss complicating factors, such as owing self-employment tax, alternative minimum tax, the kiddie tax, and long-term capital gains