Who Should File A New Form W4 to Avoid Big Tax Bills?

A W-4 Form is the Employee’s Withholding Allowance Certificate, that is filled by an employee, once he or she is hired. This document is required to be completed by the Internal Revenue Service to let your employer know what amount to withhold from your salary.

In December 2017 there were Tax Cuts implemented by Congress. According to the nonpartisan Tax Policy Center, sixty-five percent of households will get higher take-home paychecks and only six percent will get lower bills.

Old withholding system was based on the exemption criteria. The more allowances you claim, the less taxes you pay. Such factors as the number of children, an unemployed spouse, and your family financial situation could impact your allowances.

The new system repeals person exemptions and introduces doubled standard deduction. Now, individuals can deduct $12,000 (earlier $6,350) from their gross income before the tax rates are applied. For married couples, the new amount to deduct is $24,000 (earlier $13,000).

The question is: why updating information into a 2018 form W4 is so important? Most of the employers provide a blank to complete only once, when the new employee is hired. This leads to unexpected consequences. Imagine, a family always claims the standard $13,000 instead of $24,000 and in April 2019 they receive an unforeseen high tax bill.

How to File A W-4 Form?

In February 2018, IRS designed the new withholding worksheets, that are available online. They help to determine the amount for withholding to avoid under-withheld costs and possible penalties in April. Basing on these figures, you may easily complete a W-4 form.

It’s advisable for those, who live in a two-income household to re-estimate their taxes. Make sure you pay the right amount in accordance with your financial situation. Take into consideration the following information:

• If you have children aged 17 or older, now you can’t claim the expanded child credit.
• There is a caption of $10,000, so you will hardly get benefits from claiming a large amount, for example, for the state, local or property taxes.
• Those, who owe less tax in 2018 will have adjusted bills.
• If you have children younger than 17, you can adjust for less withholding, as you may probably receive benefits from increased child credit.

Find a fillable blank of a W-4 form on the website and complete it in a few minutes electronically.