If you were one of the taxpayers who received a smaller than expected refund or went from a refund position to a balance due when you filed your 2018 tax return, you’re not alone. This is because the withholding tables were altered in early 2018 to accommodate for the expected tax savings brought about by the TCJA (Tax Cuts & Jobs Act). Truth is, in high tax states such as our beloved California, those tax savings were less than anticipated in large part due to the SALT (State and Local Taxes) cap of $10K.
While it’s not to say that you got ripped off by Uncle Sam, per se, you just didn’t withhold at the surplus you may have thought you were, which likely caused you to adjust your budgeting going forward because you don’t have as much after-tax income as you originally planned on.
Needless to say, this rubbed a large contingent of taxpayers the wrong way, which has lead to the IRS creating a completely overhauled version of Form W-4, “Employee’s Withholding Allowance Certificate.” There is a draft form currently available with the final version expected to be released by November, and thus would be used in totality starting tax year 2020.
We’ve reviewed the draft form, and for many taxpayers, it will be akin to pre-filing a tax return due to all of the considerations incorporated into the Form. There is also a high likelihood for the layperson to get it wrong and find themselves in a more precarious position than they would have been with the old Form W-4 which, by the way, will be an alternative to using the new W-4.
If withholding accuracy is your concern, the best way to set yourself up for success is to work with a CPA that can help you with a tax projection that incorporates all of the provisions of the tax year in question, as well as the particulars of your situation. Might we suggest working with a Dark Horse CPA? We’ve helped countless clients get their withholdings dialed in so that they can plan their budgets accordingly and sleep easier at night.
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About Dark Horse CPAs
Dark Horse CPAs provides integrated tax, accounting, and CFO services to small businesses and individuals across the U.S. The firm was founded to save small businesses (and their owners) from subpar accounting and tax services and subpar client experiences. These small businesses are Dark Horses among their larger and more well-known competition. Being a Dark Horse CPA means advocating for small businesses by bringing them the tax strategies and accounting insights previously reserved for big business. Get a quote today.