The Tax Cuts and Jobs Act (TCJA) passed in December 2017 lowered Federal tax rates and expanded tax brackets. While 67% of taxpayers owe less and 25% will see no change, 7% will owe more tax.
With the passing of TCJA, the IRS updated withholding tables to reduce the amount of tax employers withheld. Yet, while the majority of taxpayers saw more money in their pocket with each paycheck, one-third to one-half of taxpayers may actually have a balance due and potential underpayment penalty when they file their tax return in 2019. This is due to the lower withholding in combination with the loss of many itemized deductions, especially for higher-income earners.
Though employers have been relying on the new tax tables to adjust withholding, they do not know your unique circumstances. If you find that you need to have more or less money withheld, our tax professionals can help. They can review your current W-4 form and advise on ways to adjust your withholding. With this information, you will be able to complete a new W-4 form for your employer.
Adjusting your withholding for the 2019 tax year is extremely beneficial if you are a higher-income earner, dual-income household, resident of a state with high income and/or property taxes, have previously itemized deductions or have children.
If you would like to review your withholding yourself, the IRS created an online withholding calculator to help taxpayers estimate their withholding under TCJA.