Figuring out Son’s taxes. While he will have to pay this year, next year he will get a significant amount back. About a $1500 swing.
Why are you figuring out son’s taxes? I have never seen either kids’ tax forms, 1099s, W-2 or refund check, if any.
So are you saying YOU have all of the necessary information to recalculate your new withholding with new tax tables not yet published.
Must be nice to be a soothsayer.
Certainly @yourmomma has all the information to calculate her withholding. She’s got the legislation itself.
I thought all the tax rates and brackets were published after the legislation. Were they not?
Have you seen the new tax tables yet? You know…the ones where salaries are listed…and the various filing statuses are listed…and you can look for where YOU are?
At this point, I believe there is extrapolation from what the new legislation stated…but so far as I know…nothing new has been released by the IRS. And won’t be until February.
Honestly…I believe the way folks will get more money in their take home pay is that less will be withheld. But I’m not sure that is a guarantee that money won’t be due come April 2019.
We looked at our tax situation…and we will not have reduced taxes…it looks like we will actually have additional taxes…so a reduced withholding is going to not be to our benefit.
We will try to adjust accordingly.
If your situation is straightforward, it’s not that hard to calculate what you will owe for 2018. The brackets are public, the credits are public, the standard deductions are public, the itemized limits are public, the AMT formula is public. Yes you have to have some understanding of how taxes work.
It gets more iffy if you are self-employed because figuring out if you get a deduction, and how much, is not so well defined yet.
Brackets:
https://www.doughroller.net/taxes/federal-income-tax-brackets-deductions-and-exemption-limits/
Maybe, maybe not. If we accidently short an employee $0.05 they are in the office. But, yeah some have no clue. Can’t do much about that.
Yes. I have enough information to calculate withholding.
I know what my weekly/annual income will be. If it changes during the year, I’ll need to adjust accordingly.
I know that my RE taxes and mtg. Interest will be less than the new standard deduction. So I’ll be using the standard deduction.
I know what my child credit will be.
I know what the marginal tax rates are.
I can calculate it all by hand, and/or verify with an online calculator to get an estimated tax amount under the new law. I can then divide by 52 weeks (for a weekly check) and get the estimated amount I need to withhold.
It’s not rocket science. How do you think the IRS computes their withholding tables?
The concept behind the W4 form is so that the average taxpayer does NOT have to calculate their tax bill for the upcoming year and divide by their number of pay periods and say this is the amount I want withheld. Instead, they complete a simple form based primarily on household size. The average person is not great at planning ahead financially and will accept a larger paycheck with happiness rather than skepticism.
People on CC skew higher income and more highly educated. Anyone following this thread has more than a passing interest in tax policy and has probably already run at least one tax calculator. I doubt the average person could summarize the bullet points of the new tax law, let alone some of the finer details. Does the average person know the difference between a deduction and an exemption?
I think a plan to rush lower withholding into effect next month, without considering the consequences for April 2019 is irresponsible partisan politics.
Maybe it will be not too difficult for small employers who can call in each employee and try to figure it out, but what about huge corporations who have hundreds of thousand employees. Walmart has 2 million employees just in the US and no IRS forms for employees to even fill out.
Anither good point here - most Americans like getting tax refunds. While an interest free loan to the government is not the best idea - many view this as a form of forced savings - a lump sum used for a major purchase or debt repayment. Overly reducing tax withholding now may reduce the number of people getting refunds April 2019. Strictly speaking, that is a good thing, but folks who count on that $2000 or $3000 refund every year and plan on it will not be happy.
https://www.politico.com/story/2018/01/10/tax-reform-paychecks-irs-332183
Self-employed people are typically making estimated payments on a quarterly basis. You can use the safe harbors to avoid penalties/interest for under paying. As the year moves forward, I would expect there to be more clarity in terms of the new tax laws with respect to self employed people. There is often some guess work involved as expected income can vary as the year moves along.
I don’t want a refund…but I’d love to break even.
I don’t have a crystal ball. My earnings each year are variable…as are my DHs bonuses. If I could predict everything, I would be in better shape.
It will be what it will be.
It’s not just large employers – many small employers rely on outside companies to do their payroll. I know that is how my daughter’s company works – there are about ~30 employees, but payroll is entirely outsourced. So essentially they are in the same boat as large employers – they are relying on the payroll company, and the payroll company has hundreds of thousands of employees to worry about, with the added wrinkle that they work for thousands of different companies with different payroll structures and practices.
I do my kids’ taxes for them because the tax software allows me to do multiple returns. Also, I’m just nice that way. I think one of them is going to need an accountant soon, though, because his situation is getting more complicated.
I do my kids’ taxes because one has scholarships that are taxable and depend on my returns for her kiddie tax forms, and for the other I get an AOTC off of her return. I’d love to do them WITH my kids, but they are both in school when I work on them. They really all have to be done together to get the best ‘deal’. The scholarship kid can declare extra scholarship money if that would get me the AOTC, but shouldn’t pay more if it is of no benefit to me.
“The Internal Revenue Service (IRS) has updated the income-tax withholding tables for 2018 to reflect changes made by the new tax law. The updated tables reflect the new rates for employers to use during the 2018 tax year. Employers are instructed to use the 2018 withholding tables as soon as possible, but not later than February 15, 2018. Until employers make the switch, they’re instructed to use the 2017 withholding tables. That’s why your early 2018 paychecks may look a little different than you expect - by the end of February, your check should reflect the changes (the exact timing depends on your employer and your pay period/frequency).”
IRS Notice 1036 has the actual tables.
https://www.irs.gov/pub/irs-pdf/n1036.pdf
Interesting to scroll to the end and look at Table 7 - which shows the annual amount that should be withheld based on the annual salary - I calculated mine and it looks very low - this would almost certainly leave us owing money for 2018.