IRS & Treasury urge updated W-4 filing
For 2018 tax filings, the United States Treasury estimated that about 30 million taxpayers, or 21% of total taxpayers, would be under withheld through their wages, due to the change in tax laws*. The Internal Revenue Service made a concession in 2018 reducing the threshold of the underpayment penalty from 90% of the total tax liability to 80%. Unfortunately, taxpayers will not have a similar benefit in 2019 and future years. The IRS and Treasury are urging tax payers to file an updated W-4 with their employers to avoid a potential underpayment of taxes penalty in 2019.
In December of 2017, the “Tax Cuts and Jobs Act” was passed, resulting in significant changes to the tax code. Some of these changes include elimination or reduction of some itemized deductions, updated tax brackets, and the removal of personal exemptions. Pre-2018 withholding was calculated based on the personal exemptions that taxpayers anticipated claiming with their tax filings. Under the new tax law, there are no personal exemptions.
Please take a moment and consider filing an updated W-4 with your employer to be proactive in avoiding potential unnecessary penalties. If you have any additional questions or concerns please do not hesitate to contact Edelstein & Company, LLP and we will gladly assist you with all of your tax matters.