An Accurate IRS Form W-4 is Imperative
Do you wonder, why getting the W-4 right is necessary? At the beginning of every year, employers request employees to complete the IRS Form W-4. Getting the w-4 right is important, but why make such a big deal about it? You are probably thinking, “Can’t you just correct the w-4 form?”
There is much more to it than just a correction. The w-4 form provides employers with the information they need to determine the amount of federal income taxes to withhold from an employee’s paycheck. It is also to make sure that employee’s personal information is accurate, as well. So, having an accurate W-4 on file is necessary, and that the form w-4 be complete.
W-4 Complications Are No Fun for Anyone!
As simple as the form looks, getting those entries on the form to produce the best withholding amount is tricky. The passage of the tax reform added additional complications. And, the IRS has put a delay on a major revision of the W-4 until the 2020 tax year. In the meantime, taxpayers must get along as best they can using the old version of the W-4. Don’t let the length of the form fool you; again, getting the W-4 right is important.
Even though the W-4 form itself appears to be simple, the instructions come with an extensive worksheet, which may or may not produce the results you hope for. In addition, there are other issues to consider, such as:
Maybe you want to a substantial refund when your taxes are done next year. This generally requires custom W-4 adjustments, to produce excessive withholding. Keep in mind, when you have a large refund, you give Uncle Sam an interest-free loan. We always say, better the money in your pocket than anyone else’s.
Here is a other reason for why getting the W-4 right is important. Your spouse may also work, and your combined incomes may put you in a higher tax bracket. Although the IRS provides a special worksheet for married taxpayers if both spouses work, it may not always provide the results you want.
Other Income and Tax Issues
In addition to payroll income, you may also have self-employment income, which is subject to both income tax and self-employment. So, you may require a combination of payroll withholding and estimated tax payments, adding additional complications to the IRS Form W-4.
These are just the tip of the iceberg, as there may be investment income or losses, business losses, tax credits, special deductions and loss carryovers, just to name a few more situations that could impact your tax prepayments and withholding for the year.
Do you have questions as to why getting the W-4 right is important?
We can’t emphasize it enough, getting the W-4 right is important. Perhaps you are concerned about getting your withholding correct, please contact this office and ask for Alex Franch, BS EA. Alex will project your 2019 tax liability and complete your W-4 after taking into account multiple employments, a working spouse, self-employment income and other tax issues unique to your specific tax situation. And, with tax season quickly approaching in a little over a month, we encourage you to be proactive and set up your appointment today! We are also offering a variety of client discounts to save you money.
Alex Franch, BS EA
Alex is a Tax Specialist and Partner at Joseph Cahill & Associates / WorthTax. He has a diverse background including a Bachelor of Science from Boston College in Mathematics and extensive military service. Alex is an Enrolled Agent and has a decade of tax preparation experience. He is passionate about serving businesses with tax and financial planning.
Sources and Resources
- Form 1099 Miscellaneous Filing Deadline
- IRS Tax Guidance: S Corporation Stockholder, Reasonable Compensation
- 12 Common Tax Problems to Avoid
- Tax Reform is Confusing Part 2
- Tax Reform is Confusing! Here is a Side by Side Comparison Part 1
- Learn About This Year-End Tax Strategy
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- 529 Plan: Higher Education, Learning the Hard Way
- Minimizing Tax on Social Security Benefits
- Employee Business Expenses: Tax Reform Suspends Tax Deduction
- Preparing Taxes for 2018 and Beyond