Were You A Winner or A Loser?
Now that tax season is officially over, unless you filed an extension, you can look back and make an assessment regarding your personal situation. Are you happy or unhappy with the outcome? Did things end up the way you expected or were you surprised? If you were surprised, let’s look at some tips to make next year less of a surprise.
- Tax Cuts and Jobs Act(TCJA): This change in the tax law decreased the amount of your wages that was being withheld. When it went into effect on January 1, 2018 you may have noticed more income in your paycheck because of less being withheld.
- You have a change in your family situation and/or your income. If one or more of your children turned 17, then you were no longer able to claim the child tax credit for them. Also, if your income increased significantly, there is the possibility that you did not change/update your withholding.
- You made an early withdrawal from a retirement plan and did not have the penalty amount withheld. Your employer and/or administrator of the plan will withhold 20% and the IRS will penalize you 10%.
If any of these reasons apply to you, then you may want to update your W-4. You may even want to have an additional amount withheld if you anticipate a change in family status and/or income or you plan to make an early withdrawal from a retirement plan. Although early withdrawals from retirement plans are not recommended, I understand that sometimes they are the last resort for emergency expenses.
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