At a recent IRS Stakeholder Liaison meeting in Los Angeles, the IRS managers at the meeting revealed that they had been testing the IRS’ Paycheck Check-Up tool – and most of them learned that they were going to owe money on April 15th.
In fact, some of them have used the system a couple of times during the year, as their household earnings changed, and each time found that they needed to adjust their withholding to avoid facing a balance due. What’s worse is, they learned that very few American employees have submitted updated Forms W-4 to their payroll departments. How did they learn this? By asking the members of the payroll providers organization how many new W-4s were submitted by existing employees in 2018.
Based on their experience, it’s quite likely that you’re going to come up short for 2018, as well. How can you avoid getting into trouble? Please make sure to use the IRS’ Paycheck Check-Up tool, or log into your favorite tax software, to do a projection to see if you’re going to owe money for 2018.
If you find that you will owe, you have three options right now.
1) Submit a new Form W-4 to your payroll department immediately with higher withholding – or even with an extra amount, on line 6, to be taken out for each paycheck this year. (Remember to submit a new one in January so you don’t have that extra amount deducted all next year.)
2) Make an estimated tax payment on January 15, 2019 to cover the shortfall for 2018 – to avoid, or minimize, underpayment penalties.
3) Start saving money right now so you have enough money to pay the bill by April 15th.
Knowing where you stand, right now, is extremely important. One of the most common reasons for people starting the cycle of not filing tax returns is, that they owe money and just don’t know what to do about it. Please don’t let that happen to you. That path ends up being stressful, expensive and leads to ruined credit, loss of sleep, even broken relationships. Or worse. So don’t let that happen!
And if you find that you still owe too much money by April 15th – file an extension and Ask TaxMama® what to do. You will get guidance and stay out of trouble. Really.
To make comments please drop into the TaxQuips Forum.
To help you with your 2018/2019 tax planning, please join me on December 5th for a SPECIAL Tax Cuts and Jobs Act webinar to help folks who are self-employed, and folks with large employee business expenses to restructure your tax picture and cut your taxes. https://taxmama.com/asktaxmama/webinar-the-trump-tax-plan/