Withholding Changes
The new tax law made it hard to know how much to withhold from your paycheck every few weeks. As a result, many people withheld less than they might otherwise have, and either received a smaller rebate than expected or had to pay additional taxes in April.
Now the tax agency has released a proposed new updated Form W-4, which reflects the changes from the Tax Cuts and Jobs Act—including the doubling of the standard deduction, eliminating personal exemptions and limits on certain itemized deductions. You can find the draft form here and the plan is for everyone to use some version of this in 2020.
The current W-4 asks taxpayers to note the total amount of allowances they’re claiming (the more, the less tax withheld), and any additional amount they want taken from each paycheck. The new form will ask you to account for multiple jobs within your household, and to spell out the details of any other income that didn’t have taxes withheld, including interest, dividends and retirement income. An additional section asks taxpayers to claim their dependents, and to factor in the $2,000 child tax credit for those under 17, or the $500 credit for other qualifying dependents.
Tax experts say the best way to fill out the new W-4, when it’s approved and online, will be to sit down with an expert or tax preparer, with last year’s Form 1040 in front of you. That way, you can account for all the income you may receive in the coming year, and do a better job of withholding the appropriate amount.
About the author
Athena K. Stone has been with Attentive Investment Managers, Inc. since 2003, is an Investment Advisor and the Chief Compliance Officer for the company. Mrs. Stone earned her Chartered Retirement Planning Counselor (CRPC) designation in 2010 from the College for Financial Planning. She received the designation of Accredited Investment Fiduciary (AIF) from Fi360 in 2011. She earned her Bachelor of Arts Degree in Organizational Leadership from Brandman University in 2012 and her Master of Science in Financial Planning and Designation of MPAS (Master Planner Advanced Studies) from the College for Financial Planning in 2018.
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