We are nearing the 2019 “Tax Year Finish Line”… but there’s still time to address a handful of potentially tax minimizing items*. One that was a major item of confusion for taxpayers in 2018 was withholding elections. Especially for taxpayers making under $250,000 (and ALL taxpayers) these elections can make a big difference between getting a REFUND** and NOT getting a refund.
See the IRS website (clearly written article) that can help you make this decision: IRS Reminds Taxpayers to Adjust Tax Withholding to Pay the Right Tax Amount
- Bottom line, by adjusting withholding allowances you authorize your employer to take out either MORE or LESS taxes from your pay during the year. Decreasing allowances means MORE is taken OUT of your paycheck all year long (you receive slightly less take-home pay), and you therefore may be able to get a bigger refund.
- Another way not to be “caught short” on April 15th is to discuss with your CPA paying quarterly estimated taxes or “quarterly estimates”. This way you pay a more accurate amount of taxes during the year and are less likely to owe or have a “surprise tax payment” due on April 15th.
Even though last year a well-documented two thirds of taxpayers paid LESS taxes (even slightly less) it did not feel like less taxes due to taxpayers not fully understanding withholding rates.
Please ask for additional ideas and strategies, especially for those who are self-employed or if income is much higher (or lower) than last year.
* Always consult with a CPA for tax advice and planning.
** Remember: when you get money back from the IRS at tax time, it is called a REFUND. A common misconception is to call it a “return”. The “return” is the tax document that you sign and file. The REFUND is the money you get back.