Checking on your taxes for the year and reviewing tax reform is so important, even the IRS is sending out reminders! The “Get Ready” campaign launched on IRS.gov this week, which encourages taxpayers to gear up for a successful tax season.
The number one trick the IRS is promoting: Do a paycheck checkup! But what is that, anyway? Let’s break it down.
Covering your withholding bases. For most employee paychecks, your employer calculates how much you’ve earned, shaves off a bit to cover your tax obligation, and sends you the rest. You are ultimately responsible for how much gets sent to the IRS, though: If too much is sent, you’ll get a refund after you file. If too little is sent, you’ll owe taxes after you file.
Why is this important to review? Well, with the Tax Cuts and Jobs Act of 2017 officially in effect, many people’s taxes have changed quite a bit. A withholding amount that covered your taxes last year might not this year, or you may be withholding much more than necessary.
With the end of the year coming up quickly, it’s more important than ever to take a second look at your paychecks—if you haven’t been withholding enough money throughout the year, you still have enough time to set aside the taxes you owe before you’re surprised with a bill after you file in a few months.
So how can I tell if my withholding amount needs adjusting? JP Income Tax can calculate your withholding amount, and there are several different tools available. We have an estimator that not only calculates your taxes owed or refund amount, but we can also explains how tax reform affected you this year. The IRS also has a withholding calculator on their website to help taxpayers determine if they need to adjust their Form W-4.
Turns out my withholding is way off. What should I do? No need for alarm! If you haven’t had enough taxes withheld from your paychecks over the year, put a plan in place to save up the remainder of your taxes owed by mid-April next year. If you’ve had too much withheld, you’ll be getting that back in a refund when you file—hooray!
Either way, you should have us check your Form W-4, update your withholding allowances, and turn it in to your employer. That way, the last paychecks you receive for the year will have accurate numbers, and you’ll have a fresh start in the new year. So what else can you do to get ready for your tax return? Ask us about Tax Reform - you can then come back in January to get this thing done!