Your Paycheck Got Bigger, Now You Need to Check Your Withholding
Thanks to the recent tax overhaul, most taxpayers are seeing an increase in their take-home pay.
On a quick side note, a recent article by Taylor Tepper at Bankrate.com noted that only 41 percent of Americans were aware of a change in their pay at all. Now that’s a problem. If you’re not aware of how much money you have coming in – and going out – it’s impossible to budget and maintain a responsible financial plan. But I digress from the main point of this post.
The increased paychecks are a result of the U.S. Treasury providing revised withholding tables to employers. The new tables lower the amount employers withhold, and, thus, increase the amount in an individual’s paycheck.
All things being equal, that should equate to a 2018 tax year refund/payment similar to what an individual taxpayer will see when filing his/her taxes this year.
However, things aren’t necessarily equal due to a variety of changes the tax overhaul made to the tax code, the increase of the child tax credit and the reduction of the state and local income tax deduction being just two.
The Wall Street Journal published an article by Laura Saunders titled “Check Your Withholding Math or Risk a Painful Tax Shock,” that provides a little more detail on what the potential pitfalls may be. The article may, or may not, be behind a pay firewall.
The bottom line, anyone who’ll be filing taxes next year (2019) needs to check your withholding with the IRS’s Withholding Calculator. It can be found at the link below.
To complete the calculations, you’ll need:
- Your most recent pay stubs
- Your most recent income tax return
While many employees are getting nice surprises as a result of the tax overhaul – whether they know it or not! – you most definitely don’t want to have a different kind of surprise come next year’s tax filing season.
The Withholding Calculator can make sure that doesn’t happen to you.
Image courtesy of everydayplus at FreeDigitalPhotos.net
