Sep 01, 2019
By Cathy Johnson, CPA, CGMA Chief Administrative Office and CFO for Terry Lockridge & Dunn/World Trend Financial
The IRS has been busy during the lazy days of summer. They recently released a new Tax Withholding Estimator calculator.
Many taxpayers were surprised with the size of the income tax refund they received this year, learning they were under withheld on their payroll taxes in 2018 due to the Tax Cuts and Jobs Act. The IRS noticed and developed a new calculator you can use to determine if your payroll withholdings are what they should be. The new calculator can even show you what your payroll withholdings should be to have zero tax liability on April 15th, or a specific amount of tax refund.
To get started, go to https://apps.irs.gov/app/tax-withholding-estimator/about-you. There are a few documents you will want to have on hand before you begin: you will want yours, and/or your spouses most recent paycheck stub showing current and year to date earnings and Federal payroll tax withholdings; same for any pensions being received during 2019; your 2018 tax return to estimate income other than wages/pensions; as well as the amount of expected tax credits and finally you will need your filing status. If you are contributing to a flexible spending plan or a retirement plan through payroll, you will need to know the 2019 amounts to be contributed. Also, if you plan to itemize for 2019, rather than take the standard deduction, you will need to know those amounts.
Once you have these items gathered, it will not take very long to work through the calculator. If you decide after a few screens that you need to revise a previous answer, you can go back and make the update without losing information entered. Once completed, you can print out your results. I do not believe you can save your entries in the calculator once you leave the website. One thing I noticed is there is no specific question relating to capital gains activities. All income input is calculated at ordinary income tax rates, so keep that in mind when reviewing the results.
September is a good time for a Payroll Tax Check Up to see if you are on track. There are still several payrolls left in 2019 to adjust your tax withholding, if needed. Reach out to your accountant if you would like to discuss your specific situation. They can be reached at 319-364-2945 in Cedar Rapids, or 319-339-4884 in Iowa City.