11 Jan Changing withholding because of tax plan?
Q. Because the IRS will put forth new guidelines to employers with the new lower tax brackets, I will have fewer taxes taken out of my paychecks. As a result of the loss of deductions, I’ll likely end up paying an underpayment penalty next year (to add insult to injury). Should I lower my exemptions or even submit an extra federal tax payment amount per paycheck?
— Unhappy taxpayer
A. You’re smart to think ahead so you’re not walloped with a larger-than-expected tax bill for your 2018 taxes come April 15, 2019.
We don’t yet know what the new withholding forms — W-4s —will look like.
“The IRS should be releasing them in a few weeks for the 2018 year based on new tax rules,” said Kenneth Bagner, a certified public accountant with Sobel and Co. in Livingston.
When the forms come out, you can change your withholding by filling out the new W-4 form.
“My sense is employees will have to fill out information to show whether they can still itemize deductions,” Bagner said. “If they can’t, then that should be taken into account in the new withholding tables.”
To figure out what kinds of changes you should make, including whether it makes sense to have additional withholdings, consider speaking to your tax preparer or use an online calculator.
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This post was first published in January 2018.NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.