There's a New Kid in Town
/“A long, long time ago I can still remember how that music used to make me smile. And I knew if I had my chance that I could make those people dance; and maybe they’d be happy for a while.” (American Pie by Don McLean) Are you singing with me yet?
I remember when most federal income tax filings I prepared had enough, or maybe even far more, federal taxes withheld than was required so the taxpayer would get a refund when they filed their return. Many taxpayers even used their tax withholdings as a pseudo savings account. And, yes, they would dance and be happy for a while. Now, February makes me shiver, with every tax return I deliver. Bad news on the doorstep. I, sometimes, can’t take one more step.
The tax withholding tables issued in 2018 wreaked havoc for American taxpayers, as many were under-withheld on their federal return. I’m hoping this tax filing season will find withholdings were adjusted and are now near normal without major surprises. Even though for many taxpayers, federal withholdings will still need to be “tweaked.”
You may be wondering how we do that. Well, “there’s talk on the street; it sounds so familiar. Great expectations, everybody’s watching you. People you meet, they all seem to know you. Even your old friends treat you like you’re something new.” (New Kid in Town by The Eagles) This new kid in town I’m referring to is the revised Form W-4, Employees Withholding Certificate.
It isn’t required to file a new form with your employer; your old one will continue with the standard tables. However, this fresh new form assists in determining how much your federal withholdings should be. Rather than “allowances,” you now answer how many children and “other” dependents you have, then multiply the number by the amount of the federal tax credit. Tax filers can also simply check one box if they work two jobs or have a spouse that works. If you don’t want your employer privy to that information, you can always fill out the worksheet to determine how much extra you should have withheld. Note, you aren’t required to answer every question on the form, but you may like to report to your tax preparer, “I just dropped in to see what condition my condition was in.” (Just Dropped In by Mickey Newbury)
Oh, come on! I know a few of you were singing with me! Happy filing!
- Pam Smitson, CPA, CGMA, Smitson Erhart-Graves Financial Advisors
