Updated Income Tax Withholding Tables

The Tax Cuts and Jobs Act (TCJA), enacted on Dec. 22, 2017, was the first major overhaul of U.S. federal taxes in more than 30 years

In response to these changes, the Internal Revenue Service issued new income tax withholding tables for 2018 and come April of this year, while most taxpayers saw a decrease in tax liability,  many taxpayers found themselves with much less withholding for the year. The reduced withholding generally resulted in smaller refunds or worse, unexpected balances due and possibly related underpayment penalties.  The IRS plan to give you your tax savings early by reducing your withholding totally backfired for many taxpayers. 

With this in mind, we urge you to review your withholding for 2019 to determine whether it is adequate based on your tax situation.  Generally, you must have had enough income tax withholding from salaries and wages and/or have paid estimated tax payments throughout the year of 90% or more of your 2019 tax liability for the year to avoid underpayment penalties. Another exception to the underpayment penalty is to have paid enough income tax through withholding and/or estimated tax payments to cover 100%, 110% for high-income taxpayers, of your prior year (2018) tax liability. 

For the 2018 tax year, so many taxpayers had insufficient withholding under the new withholding tables that the Internal Revenue Service dropped the 90% percent threshold for exception to penalty to 80%. There is no guarantee that the Internal Revenue Service will be so forgiving for 2019.

Please contact us should have any questions regarding your ideal level of withholding.