Hi, everyone! I think I am finally recovered from tax season.
Today the IRS released a new W-4 form to more accurately reflect the amount of tax liability that you will have during 2019. You can view the new form here. Although the first page does not look very different, the worksheets that accompany the form are a bit more complicated.
To begin processing the worksheets, you will need to review two separate IRS Publications, process several different If/Then situations, and figure out how many children will qualify for the child tax credit. Once you have that info you will multiply the number of kids that qualify by either 2 or 4, depending on your total income for the year. If you want to tackle itemized deductions, adjustments or additional income you get to subtract, add, subtract, divide, and add again. Then, if you and your spouse both work you need to interpret two separate tables. But first you must figure out the total highest paying job and the lowest paying job and then look at the qualifier to be sure you don’t enter more than “3” no matter what the table says. And then you will need to find some other numbers on the worksheet, subtract, find the amount on another table, and multiply that amount by a different line and then divide by the number of pay periods remaining for 2019.
Or they have an app on their website www.irs.gov/W4App that will calculate your withholding status for you.
For the app, you will need to have your paycheck stubs handy so you can list your earnings, retirement contributions, and health insurance deductions. You will also need to decide which credits you are eligible for and the amounts of any student loan interest or other adjustments that you will claim on your tax return at the end of the year. Then once you have entered all that information for all the jobs that you and your spouse have during the year, you will need to estimate your itemized deductions. The website will calculate which is better, standard or itemized, and generate a results page. After running a married filing joint scenario with no dependents and an annual income of $50,000 I was astonished to see that the W-4 should be completed with Married 6 as the withholding status.
All I can say is, wow!! The idea of just being able to mark Married 3 if you are married with 3 kids has gone out the window. If this makes your head spin, I understand. It took the IRS 18 months to come up with the new form and worksheets. I figure it will take us all that long to fill them out.
This should help you see the incredible changes that were brought into the tax code with the Tax Cuts & Jobs Act. While we are all still recovering from some shocking results during the 2018 tax season, we can now begin to plan for 2019.
My Free Advice this Friday: Check out the new form or the App. You may be surprised by the results! If any questions arise, you know where to find me!
Check back next week for a look at our Pay-As-You-Go Tax System.