Federal Tax Payments
June 6, 2018
By Matthew E. Miller, CPA, MBA
Let’s start this newsletter with a reminder that if you file quarterly estimated tax payments, your 2nd quarter federal and state estimated tax payments are due on Friday, June 15, 2018. Please contact our office if you need any assistance with the filing.
We are all aware of the new tax law that was passed in December 2017. Some of us may also be aware that the IRS modified the tax withholding tables so taxpayers who were to see a decrease in their tax liability as a result of the new bill would realize the savings more immediately by having less federal tax withheld from their paycheck. Employers and retirement administrators were directed by the IRS to begin using the new withholding tables by no later than February 15, 2018. In light of the change to the withholding tables, you may or may not have noticed a difference in your net paycheck.
In response to a question as to why the changes were made to the withholding tables, the IRS responded that “new withholding tables are needed for 2018 to reflect the changes in tax rates and tax brackets, the increased standard deduction and the repeal of personal exemptions, among other things. These changes were included in the Tax Cuts and Jobs Act, signed in December 2017”.
What is of concern to us is “what if I don’t receive a benefit under the new law. Will my taxes be under withheld?”
I don’t do well with surprise financial liabilities and I’ll bet you don’t either. So, our recommendation is to make a calculation now to see where your withholding is tracking.
When we completed your 2017 return we prepared a 2018 tax projection for you based on your 2017 income and deductions. Find that projection in the soft copy of the tax return we sent you. Follow this two-step process to determine if your federal withholding is set correctly.
**If the result is a positive number, your withholding is sufficient for your projected 2018 liability.
***If the result is a negative number, your withholding is insufficient for your projected 2018 liability and you may owe money when you file. You should consider increasing your withholding to decrease your balance due when you file.
2018 is a transition tax year for all taxpayers. A new tax law with new tax rates, combined with lower withholding rates will be a source of confusion and irritation. This is the year we have to be proactive in managing our tax withholding. Please take time to check your withholding. Whether the source of withholding be from W-2 employment or from retirement sources, you must anticipate your 2018 withholding will not be the same as your 2017 withholding.
Our professionals will be happy to consult with you if you have any questions or concerns.