As enrollment season is upon us, I was reminded of a recurring theme I heard in conversations this past Spring… wait, I owe WHAT in taxes?!
While it seemed that most everyone was aware of the Tax Cuts & Jobs Act of 2017, very few noticed extra money coming in each paycheck. What they didn’t realize was that they hadn’t adjusted their withholding to account for the tax changes. As a result, their month over month paychecks were higher, but they may have received a smaller refund than anticipated - or even had an outstanding liability to Uncle Sam.
If you were in this camp after filing your 2018 returns, you weren’t alone! According to CNBC*, 80 percent of people failed to adjust their withholding after the IRS updated the income tax withholding tables. To do so, you need to update your W-4.
You might be wondering: What is a W-4? This is the form that tells your employer how much to withhold from your paycheck for taxes. Typically, you complete this upon starting a new job, but you can make changes as necessary.
So what should you do? First, reach out to your primary HR point of contact for a copy of your W-4 & review. If you’re not sure how much you should be withholding, take advantage of the IRS’s Free Tax Withholding Estimator:
**Keep in mind you will need a recent paystub to address some of the questions! If you get lost, you may want to run this by your CPA or tax professional.
While it may be late to make up for too little withholding on 2019 income, you’ll be better positioned until any future tax changes are enacted.
Next time enrollment season comes around, let this be your reminder to check on your withholding & any major changes that may have any impact on your allowances (marriage, children, filing as head of household, etc.).
Additionally, if you have any questions or concerns about your Employer Benefits: 401k (Roth vs. Traditional), Health Savings Accounts and more, we’re here to help! Be quick before your benefits’ windows close!
Registered associates of Bluestone Wealth Partners are registered representatives of Lincoln Financial Advisors. Securities and investment advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer (Member SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. Bluestone Wealth Partners is not an affiliate of Lincoln Financial Advisors.