For that reason, taxpayers should be overly cautious about their payroll withholding. One need only look at the W-4 instructions to realize that an individual without any substantial tax training can quickly become lost when filling out the worksheets. It is not business as usual.
What adds to the problem is that many taxpayers count on a refund to pay property taxes, insurance, and other large expenses. The W-4 worksheets are designed to withhold the correct amount of tax with no substantial refund, and many tax practitioners are reporting that clients’ withholdings have been reduced to seriously low amounts.
In other years, most taxpayers can look at the tax from their prior year’s return and compare it to their projected payroll withholding to see if their current withholding amount is appropriate. But some taxpayers with multiple jobs, a working spouse, or complicated returns will find it difficult to adjust their withholding to achieve the desired results.
The same problem exists for retirees with pension income, the difference being that they use a W-4P instead of a W-4.
There are concerns about the impact of all the tax reform changes on the income tax withholding. While this may provide more take-home pay, it could lead to unexpected taxes next year.
If you would like us to project your taxes and suggest how to adjust your payroll withholding so you might achieve the outcome you want, please give this office a call.