Federal Tax Withholding

[Gumby]

If you are still employed, you may have noticed a bump in your check last month as the new withholding tables kicked in. Certainly nice to get more money, but it could be a trap for the unwary.

I expect our AGI for 2018 will be almost exactly the same as 2017. I ran a pro forma tax return taking into account the changes in the tax brackets on the one hand and the loss of deductions/exemptions on the other (i.e. switch to the new standard deduction). Based on that exercise, I expect that our tax bill in 2018 will be almost the same as it was in 2017.

However, the new withholding rate would leave us almost $5000 short of that expected bill and we'd have to write a big check next April. Not a huge problem for us, but I bet it will be for many people. Coming up that short could also trigger under-withholding penalties. To compensate, I just changed our W-4's to take $100 extra withholding from each of our paychecks.

So, for those still employed, my public service announcement for today is to run your 2018 taxes under the new law and make sure your withholding will cover them. Change your W-4 as necessary. The earlier you do this, the smaller the needed change will be. This might be even more important for your adult children.

 

[jazz4cash]

I heard one of the local radio guru guys saying that most of his clients are seeing the same thing as they look at preparing for 2018 tax year. Taxes go up in most cases or stay the same but withholding is being reduced from paychecks and DB payments. I've never been able to get the right withholding just following the W4 instructions so I always end up backing into the proper amount by adding an extra $ amount to match my effective rate.

 

[candrew]

Taxes go up in most cases or stay the same but withholding is being reduced from paychecks and DB payments.

+1

DW & I noticed an increase our DB pension checks reflecting the tax law changes and reduced withholding. We've since "trued-up" our withholding to previous year levels to accurately reflect our overall tax situation for this year.

 

[MarieIG]

I upped the withholding in the beginning of the year on both mine and DH's paychecks (Federal & State). There was a lot of whining from the better half. We also pay estimated taxes on top of zero deductions and additional withholding.

 

[donheff]

I saw a bump in my Federal pension. I was withholding too much anyway since I had bumped it up the year before to accommodate CGs from a house sale so I needed to adjust anyway.

 

[meierlde]

It very much depends on the state you live in. (Those in high tax states will loose and those in low tax states will come out ok) In my case I see a 13% decrease in taxes. But then I live in Tx so there is no state income tax to consider. and because I am over 65 the new standard deduction is about the same size as the combination of deductions (and because I am single) the one exemption. Looking at the taxable income for a given taxable income the tax goes down about 13%.
For children under 17 the new tax credit is the equivalent of from a 20 k exemption for those in the 10% bracket to $5400 for the top bracket also.

 

[CaptTom]

Just today saw the bump in my March 1st pension check. Now I'm going to have to go do some math.

Anyone know of a good 2018 tax estimator site?

 

[mystang52]

Just today saw the bump in my March 1st pension check. Now I'm going to have to go do some math.

Anyone know of a good 2018 tax estimator site?

I also need to run a test extimator for DW and me. She is still working and saw a nice increase in net pay. But living in NJ we're losing a large property tax deduction so I'm also leery that this net pay increase may just be a "loan" that we will repay Uncle Sam next year.

 

[CaptTom]

I found the tax rates for 2018, and it looks like I have to "give back" ALL of my withholding reduction if I want the same (modest) refund as last year. I've already adjusted my W4's to withhold about the same as last year.

Fortunately I wasn't planning on squandering the extra "advance" I was given anyway, nor would it cause any real pain at tax time if I did.

But but for those of you with friends and relatives who may not be so savvy about finances, you might want to let them know they could be heading for a lot of trouble come April 15, 2019 if they don't check now to make sure their withholding is doing what they want.

 

[kaudrey]

try www.taxcaster.com