Getting Your Personal Tax Withholding Right for 2019

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Mark J. Corey, CPA, JD

As 2019 rapidly comes to a close, the issue of 2019 tax return filing quickly approaches. One of the items with 2018 taxes that became a big issue for some taxpayers was their tax withholding or the amount withheld from their paychecks to pay for their federal and state tax obligations. Some taxpayers had too much withholding resulting in substantial refunds (or interest-free loans to the government- as my mentor used to say). Other taxpayers had large tax bills which they were not expecting based on the results of prior years with similar income and expenses. In addition to a large tax bill, some taxpayers were also charged with a penalty for under-withholding taxes.

This became an issue because the Internal Revenue Service (IRS) changed the tax withholding tables that employers use to determine the correct amount of tax to withhold from employees’ paychecks. These withholding tables were altered in light of the significant tax changes made with the Tax Cuts and Jobs Act of 2017. The problem arose when it became evident that the revised withholding tables did not accurately reflect the changes to individual tax returns resulting in taxpayers getting vastly different results than in prior years. 

As a result of these issues, the IRS created a page on their website with a “Tax Withholding Estimator” to help taxpayers calculate the correct withholding for 2019 (and beyond). The IRS has been encouraging taxpayers to review their tax withholding's for all of 2019. However, the IRS notes that it is late in the year to make changes to your withholding that will have a significant effect on your 2019 withholding. Taxpayers are encouraged to use the estimator for their 2019 tax to see if they will likely owe taxes and to come back in January to assess their 2020 tax withholding.

Taxpayers who are most likely to benefit from the tax withholding review have:

  • Multiple jobs
  • A two-income family
  • Children or dependents
  • Itemized deductions
  • Complex tax situations

A review of these facets will help make sure they will not be substantially under-withheld and owe significant taxes at tax-filing time.

There is also a new Form W-4 Employee’s Withholding Certificate. The W-4 can be used with the estimator to adjust the taxpayer’s withholding from their paycheck. 

The tax rules for estimating withheld tax can be complicated, and if you believe you need a tax withholding checkup, please consult with your professional tax advisor.