Every new tax season brings with it a few surprises — some welcome, and some, well, just plain confusing. This year ushers in some sweeping changes to the tax code, chief among them something all employees can feel good about: the likelihood of seeing more money in their paychecks!
But before the celebration begins, it’s important that employees make sure that the amount of their withholding is correct; otherwise, they might be in for yet another and perhaps unpleasant surprise the next time filing season rolls around!
The Tax Cuts and Jobs Act of 2017 represents the greatest change to federal tax law in over 30 years. This Act includes wide-ranging provisions that take effect in various tax years and last for differing amounts of time.
From Accu Data’s point of view, the reduction in the marginal tax rates is vividly demonstrated in the tax table update that has been applied to the payroll calculations. The result in many cases is more take-home pay. It is crucial that we recognize that the payroll tax withholding table is only an estimate of your tax obligation that includes many complex factors, but it’s not a perfect measure.
As a result, taxpayers may find they are unintentionally over- or under-withholding for their taxes if they don’t do some legwork. With this key factor in mind, we suggest that you have your employees contact their personal tax preparer to advise them, based upon the many factors involved, what total target federal/state withholding might be a better estimate for 2018.
The IRS is promising a more comprehensive W-4 for 2019 that may better deal with the new tax law.