Avoid Surprises Next YearRevisit Your Wage Withholding

3/6/2018 - By John Mascaro, CPA

The IRS has just released the revised Form W-4 online withholding calculator & Form W-4 updated for the Tax Cuts & Jobs Act. The IRS has also recently released the new withholding tables to reflect the new law.  Many taxpayers are seeing increased take home pay because of the new tables. 

That said, notwithstanding the higher standard deduction for 2018, with the elimination of personal exemptions, including those for dependent children, taxpayers with children who have previously benefitted from dependency exemptions may now want to use the online calculator to get a sense of whether they should adjust their withholding allowances (and possibly update their withholding using the new Form W-4).

This is because the loss of the personal, spousal, and child dependency exemptions may not be fully offset by the higher standard deduction, the new generally lower tax brackets, and/or the new $2000/child tax credit.* This is just one reason to revisit your W-4 withholding allowances.

Who Does This Apply to?

Among the employees who should conduct a withholding checkup are: 

  • Two-income families.
  • Individuals with two or more jobs at the same time or who only work for part of the year.
  • Individuals with children who claim credits such as the Child Tax Credit.
  • Individuals who itemized deductions in 2017.
  • Individuals with high incomes and more complex tax returns.

W-4: New Form and Calculator

The new Withholding Calculator is not meant to be used by taxpayers with more complex situations, including the self-employed, individuals who owe the alternative minimum tax or have capital gains. Those taxpayers may need to wait until the IRS updates Publication 505, Tax Withholding and Estimated Tax later in 2018.

The  Withholding Calculator may be found here and the new Form W-4 may be found here. 

*Generally, the child tax credit applies to dependent children under 17 years of age.  The phase out range for that credit has been increased for 2018 to $400,000 for married taxpayers filing jointly and $200,000 for all other taxpayers

About the Author | John Mascaro
John is adept in helping companies develop and execute complex domestic and international tax strategies. He has served some of the world’s largest companies in varied industries, including IBM, Schlumberger, Siemens; and later specialized in the entertainment and media industry serving such notables as Viacom, Blockbuster Entertainment, MTV, VH1, Nickelodeon, SONY Pictures, SONY Music, Newsweek Magazine, McCann Erickson Advertising, Gruner & Jahr Publishing, Reuters and numerous entertainment and media celebrities.

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