It’s Important to Make Sure Enough of Your Income Taxes are Being Withheld
One of the most common questions we were asked last tax season here at Stevens Pierce & Associates, CPA’S, was: “How will the new tax laws impact me?”
When Congress and the President enacted tax law changes in the 11th hour of 2017, it was one of the largest reforms passed since the major tax overhaul of 1986. In short, there were changes to the standard deduction, child tax credits, and a shifting of most of the tax rates, among other changes.
Earlier this year, the IRS updated the withholding tables for wage earners and you may have noticed that your take-home pay may have increased. In the short term, that may sound like a good thing. However, it might be worth your time to double check that you are having enough income taxes withheld to cover your taxes. You still have about six months to make changes so you don’t wind up with a balance due that you did not expect.
How Should You Approach Checking Your Withholding Taxes?
There are a few strategies you can choose from.
- You may just leave it to your trained tax professional – that’s the kind of answer professionals like me enjoy hearing – we have software and templates that we use to project what your earnings will look like in 2018. OR
- If you are feeling adventurous, you can use some of the tools that the taxing authorities have put together to help you determine if your withholding will be sufficient to cover your taxes.
The IRS Withholding Calculator
The IRS has published a withholding calculator on their website to help you determine if your withholding is sufficient under the new tax law. Click here to access the calculator.
Keep in mind that you will need some information to go through this process. A few things that you might need to proceed using the IRS calculator are:
- Your most recent pay stub
- Most recent income tax return to help estimate 2018 taxes
- Consider things that will be different for you in 2018 – you can make some modifications as you go
Also, keep in mind the calculator will only be as accurate as the information you put into it.
At the end of the process, the calculator will suggest what you should claim on your W-4, Employee’s Withholding Allowance Certificate, as well as provide a link for you to complete a new W-4 and provide it to your employer.
Be Sure to Check Your Idaho Taxes, Too
After going through the IRS withholding calculator, it might make sense to look at your Idaho withholding. Earlier this year, our Idaho legislators adopted many of the Federal tax law changes and introduced a few changes, most notably, an Idaho child tax credit. The Idaho State Tax Commission has put together a statement regarding changes that may be necessary to make to your W-4 for Idaho purposes.
The Idaho instructions for the W-4 can be found here by clicking here or by going to the Idaho State Tax Commission website and clicking on the Tax Reform button on the home page.
Tax law changes happen and it is important to make sure that you pay in enough tax through your income tax withholding. Whether you have a trusted tax professional or not, there are tools available to make the process easier. Take some time now to make sure you are paying enough taxes to avoid a surprise balance due next filing season. Have questions? Contact us today at 208-734-8662. Our accountants are highly experienced in tax preparation and planning and look forward to helping you!
