Employees beware! The new withholding tax tables that have been published may cause your employers to under withhold the federal tax from your paychecks. If your employer utilizes these new tables, they are doing nothing wrong. However, the tables incorporate the tax cuts under the new law by lowering the withholding amounts. While this gives the employee more money throughout the year in their paycheck, it may cause them to owe money at the end of the year! Many taxpayers who are used to getting modest refunds may find themselves owing money at tax time.
There are multiple remedies for this situation. You may want to complete a new form W4 and submit it to your employer’s payroll department. You should indicate you are now claiming fewer exemptions than in previous years. This will counterbalance the effects of the new tax tables. You could also send in a small estimated tax prepayment during the year if you have any type of financial windfall.
This issue can get quite involved. Everyone’s situation is not the same. If you have questions, please feel free to contact our office.