By Jessica Donaldson
Whether you are an employer or an employee, the new tax laws will affect you in some way. The big question is – how? And what can you do now to help your tax situation for the year?
New information released by the IRS can help answer some of these questions, along with the updated 2018 W-4 form, which was released by the IRS on February 28th, 2018.
The 2018 W-4 comes with an updated worksheet that is designed to help each person determine the appropriate number of allowances to report, based on their situation. The worksheet is designed to help you break even for the tax year – meaning you shouldn’t have a large refund or a large tax liability when you file your annual taxes for the year.
The initial worksheet, titled “Personal Allowances Worksheet” starts off by asking simple questions about whether you file your taxes alone or jointly with someone else, along with questions about credits for children or dependents.
The next worksheet, titled “Deductions, Adjustments, and Additional Income” should only be filled out if you plan to itemize deductions, such as mortgage interest, or have nonwage income, like interest.
If you have more than one job and/or are married filing jointly and your spouse also has a job, you will want to fill out the last worksheet, titled “Two Earners/Multiple Jobs Worksheet.” Please note this worksheet is only applicable if the combined earnings from all jobs is over $52,000.
After filling out the applicable worksheets you will be given an allowance number to be entered on Line 5 of the W-4 Form. A copy of the new W-4 form can be found at the following web address: https://www.irs.gov/pub/irs-pdf/fw4.pdf
If the form is still confusing to you, don’t worry! By going to https://www.irs.gov/individuals/irs-withholding-calculator you can access an online Withholding Calculator provided by the IRS. All you have to do is answer a series of questions and it will help determine your allowance number and whether you should mark married or single on the W-4. We recommend having your latest paystub handy to help answer some of the questions as well.
As always, we recommend contacting your tax professional for any further advisement on filling out your W-4.