by Blair Butters | Jul 29, 2019 | Uncategorized
Why you need to adjust your tax withholding now Withholding taxes from your paycheck correctly can be a tricky process – if you withhold too little, you receive a bill at the end of tax season (one that, statistically, only 40% of Americans can afford to pay). If you withhold too much, you get a refund after you submit your taxes in April. Sure, many of us enjoy having a refund come every spring, but the reality is that you overpaid the government and gave them an interest-free loan, while you could have used that money yourself throughout the year. In fact, you’d see a better return on investment by letting that money sit in a high-yielding certificate of deposit or savings account. As you may know, the IRS waived withholding penalties for those whose withholding and estimated payments were at least 80 percent of their tax liability for the most recent tax year due to the significant tax law changes taking effect. For tax years prior to 2018, the penalty was enforced if you paid less than 90 percent of your tax liability, and experts expect the penalties to be enforced at the 90 percent level for 2019 and future years. This means you could face an underpayment penalty in addition to receiving a tax bill at the end of the next tax season. The IRS is also planning to make the W-4 more precise next year, with many more details to be included on a much longer form. If this form is used next year, that means there will be fewer refunds and fewer bills, meaning tax...
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