Use 2018 return to get 2019 withholding right
More than 2,000 taxpayers filed a 2018 tax return with us in the last ten weeks, making now a prime time for everyone to consider whether their tax situation came out as they expected. If it didn’t, we can use your recently finished 2018 return and adjust your withholding.
Checking and then adjusting your tax withholding can help make sure you don’t owe more tax than you are expecting. Usually you can also avoid a surprise tax bill and possibly a penalty when you file next year. At the same time, with the average refund more than $2,700, some taxpayers may choose to reduce their withholding to have a larger paycheck and smaller refund.
Now is an ideal time to check withholding! Since taxpayers need to estimate deductions, credits and other amounts for 2019, having similar information from the 2018 return can make our job easier.
Who should do a withholding checkup?
Though doing a withholding checkup is a good idea every year, for many people, it’s even more important this year. This includes anyone who:
- Adjusted their withholding in 2018 – especially those who did so in the middle or later part of the year.
- Owed additional tax when they filed their tax return this year.
- Had a refund that was larger or smaller than expected.
- Had life changes such as marriage, childbirth, adoption, buying a home or when income changes.
In addition, most people are affected by changes made in the Tax Cuts and Jobs Act (TCJA), the tax reform legislation enacted in December 2017. These changes included lowered tax rates, increased standard deductions, suspension of personal exemptions, the increased Child Tax Credit and limited or discontinued deductions. As a result, Cook & Company continues to encourage clients to check their withholding as soon as possible.
This includes clients who:
- Have children and claim credits, such as the Child Tax Credit
- Have older dependents, including children age 17 or older
- Itemized deductions in the past
- Are a two-income family
- Have two or more jobs at the same time
- Only work part of the year
- Have high income or a complex tax return (the majority of our clients)
Sooner is better for a withholding checkup
Cook & Company Tax Advisors urges everyone to do a withholding checkup as soon as possible so that if a tax withholding adjustment is needed, there is more time for withholding to happen evenly during the rest of the year. Waiting means there are fewer pay periods to withhold the necessary federal tax.