2018 Tax Estimate Issues

2018 Tax Estimate Issues

I know that by now everyone is aware of the new tax act that passed last December. As I wrote about earlier this year and I am hoping you did check your withholdings to make sure that you were having enough taxes taken from your paycheck. All I know is that my own paycheck did not have enough being withheld from my check to cover my potential tax liability come the end of the year. To combat this shortfall, I did adjust my 2018 taxes by paying some quarterly estimates to the IRS. That was I am hoping to minimize my 2018 tax bill come tax filing time next year.

What do you do if you did not check to see if your company was withholding enough in taxes? Well, it is not too late to make some adjustments to your withholdings to avoid a nasty tax bill next year. I did find a spreadsheet early in the year and provided a link to where it could be downloaded, and you could calculate your own estimated taxes. From what I am seeing it is fairly accurate and will provide you with a good working example of what your taxes could and should most likely be. If you are interested in the spreadsheet, the link to it is http://bit.ly/2orTOnz.

If you go to that link which is a Dropbox site containing the spreadsheet, then you will be able to fill out the spreadsheet to see what your estimated taxes for 2018 will be. This will allow you to see if your company is indeed withholding enough in taxes from your paycheck.

What do you do in the event that your company is not taxing out the correct amount in taxes? As your tax goal technically should be to either pay very little or no taxes or get a small refund at the end of the year. After all, you do not want to be giving the government an interest-free loan, do you? While most of us would say no to that many people, do use a tax refund as a savings account but remember that is a non-interest-bearing account you are saving in to.

So, if you determine that you are paying too much, you now have the opportunity to increase your number of dependents on your W-4 for the rest of the year. This will mean that your company will take fewer taxes out of your check. That way you can reduce your withholdings for the last few months of the year and ideally pay closer to your tax liability meaning you will pay closer to the correct amount reducing the loan you are providing the government and also reducing your possible refund.

Tax withholdings

However, if you are not paying enough in tax withholdings, you can adjust the amount that will be withheld from your paycheck and increase the amount of taxes you pay over these final few months. This will increase your taxes, and the hope is you pay enough extra over the final months of the year to avoid any large payments come tax filing time next year.

I ran the numbers in the spreadsheet in February when I got my first paycheck under the new tax bill and based on what I saw I was going to owe an estimated $1,800 in taxes if I did not change my withholdings. As I did not want to pay almost two thousand next year and if I changed my exemptions on my W4 I would either pay too much or pay too little. So, I elected to leave my W4 alone and pay quarterly payments to the IRS to make up the underpayment that was projected for my tax year. This way I get the money and can earn a very small amount on it in my online savings account and then pay a quarterly payment to the IRS avoiding the dilemma of under or overpayments. But to do this strategy, you need to take action early in the year and is something to consider for the tax year 2019 if they do not make the necessary adjustments on the withholdings.

Taxes are never fun and can be a real pain, but they are something that we cannot avoid and must adhere to the stated IRS rules. But that does not mean that you do not or cannot be prepared to the best of your ability when it comes to your 2018 taxes. I urge everyone to go to http://bit.ly/2orTOnz and obtain this extremely useful and free spreadsheet to get an estimate on your 2018 taxes. While the spreadsheet is fairly easy to use and straightforward, it can be daunting especially if you are not used to tax forms or how to fill them out.

In the event, you are not comfortable doing this yourself, or if you need assistance, I am more than happy to assist you for a small hourly fee. And then if you need assistance in adjusting your withholdings for that same fee, I will assist you in making the best adjustments you can in the time we have left in the year. And if you take advantage of my assistance in this estimate process, I will also offer small discounts on tax preparation on your 2018 taxes. If this is something that interests you, please send me an email at kirk@kgmeyerpc.com, and we can make arrangements to get on top of your tax situation for 2018.

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