Now that you’ve filed, do you need to tell your employer to withhold more or less income to pay your 2019 taxes?
Was your refund lower than expected, or did you have an unexpected tax bill when you filed this year? You can take steps today to make sure your federal income tax withholding is on the right track for this year.
Checking your withholding at the beginning of the year helps ensure you don’t have too little or too much withheld from your paychecks throughout the year. This is especially important if you changed your withholding in 2018. A mid-year withholding change in 2018 can have a different full-year impact in 2019. You should also check your withholding any time your personal or financial information changes. Use the Withholding Calculator to help you decide whether you need to change your withholding.
Federal taxes operate on a pay-as-you-go basis. This means that you need to pay most of your tax during the year, as you earn the income.
Paying too much tax throughout the year will result in a refund while not paying enough can lead to a tax bill, penalties and interest when you file.
One way to avoid owing a balance is to correctly calculate and adjust how much tax you should have withheld from your wages. Use the Withholding Calculator to help you decide whether you need to change your withholding.
Another option is to consider making quarterly estimated tax payments. Those who don’t pay taxes through withholding, or don’t pay enough tax that way, may still use the Withholding Calculator to determine if they have to pay estimated tax quarterly during the year to the IRS. Those who are self-employed generally pay tax this way. See Form 1040-ES, Estimated Taxes for Individuals,
Changes to the standard deduction
Major tax reform that affects individuals — including changes to the standard deduction — was enacted in December 2017. This means that many people will no longer itemize their deductions and will have a simpler time filing their taxes.
The standard deduction is a dollar amount that reduces the amount of income on which you are taxed and varies according to your filing status. Most people have the choice of either taking a standard deduction or itemizing. If you qualify for the standard deduction and your standard deduction is more than your total itemized deductions, you should claim the standard deduction in most cases. This means you won’t need to file a Schedule A (Form 1040), Itemized Deductions, with your tax return.
The standard deduction for each filing status is:
• Single $12,000 (up from $6,350 in 2017)
• Married filing jointly, Qualifying widow(er) $24,000 (up from $12,700 in 2017)
• Married filing separately $12,000 (up from $6,350 in 2017)
• Head of household $18,000 (up from $9,350 in 2017)
The amounts are higher if you or your spouse are blind or over age 65.
Tax reform changed several itemized deductions
Major tax reform that affects both individuals and businesses was enacted in December 2017. It’s commonly referred to as tax reform.
IRS Publication 5307, Tax Reform Basics for Individuals and Families, is a key resource to understanding the impact of the tax reform on deductions.
If you formerly itemized on Schedule A, Itemized Deductions, you may now find it more beneficial to take the standard deduction. In addition to nearly doubling the standard deductions, tax reform changed several itemized deductions that can be claimed. These include:
The total itemized deductions are no longer limited if the adjusted gross income is over a certain amount.
• The combined, total deduction for state and local income, sales, and property taxes is limited to $10,000 ($5,000 if married filing separately).
• The deduction for mortgage interest is limited to interest paid on the portion of a loan secured by the main home or second home used to buy, build, or substantially improve that home (qualifying debt).
• Most miscellaneous itemized deductions are no longer allowed. These include unreimbursed employee expenses (such as business-related meals, entertainment and travel expenses, etc.), tax preparation fees, union dues and many other expenses.
• The limit on charitable contributions of cash has increased to 60 percent of the adjusted gross income.
• Eligible medical and dental expenses that exceed 7.5 percent of the 2018 adjusted gross income are deductible.
• “Seat license” or other fees paid in exchange for the right to buy seating at college athletic events are no longer deductible.
• Net personal casualty and theft losses are deductible only to the extent they’re attributable to a federally declared disaster.