Federal income tax withholding – should you check yours?

May 18, 2018

Federal income tax withholding – should you check yours?

As a result the 2017 tax legislation many employees were able to change their federal income tax withholdings and reduce the amount withheld. In March the IRS even provided a new online withholding calculator to help with the process. This was great news for many taxpayers.

However, similar to most tax matters, the determination of the proper amount of federal income tax withholding can be affected by various factors. Part-time and seasonal workers are encouraged to check their withholding amounts. The IRS advises that the IRS Form W-4 worksheets do not properly account for part-year employment and instead the IRS urges part-time employees to use its “Withholding Calculator”.

In addition, the IRS is warning employees who usually itemize deductions to check their withholding to avoid tax surprises. The following changes in the new tax law could affect the federal income tax of someone who usually itemizes:

  • Limits on the deduction for state and local taxes
  • Limits on the deduction for home mortgage interest in certain cases
  • Exclusion of deductions for employee business expenses, tax preparation fees and investment expenses, and safe deposit box fees

In addition, the Tax Cuts and Jobs Act nearly doubled the standard deductions which could be beneficial for taxpayers who do not normally itemize deductions.

Therefore, in order to avoid under-withholding and an unexpected tax due or unnecessary over-withholding the IRS recommends the use of the Withholding Calculator to calculate an estimate of the proper amount of withholding.

If you have questions regarding your federal income tax withholding or need help calculating the proper amount to be withheld contact your Herbein+Company, Inc. tax adviser.