Check your withholding, everyone!

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sophie
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Check your withholding, everyone!

Post by sophie » Tue Feb 06, 2018 11:26 pm

I noticed my last paycheck was larger than expected, and it turned out that - yes - my employer had adjusted withholding for the new 2018 numbers.

Due to limitations on deductions (I'm an NYC resident, need I say more) my taxes are going up, and if I did nothing I'd end up owing an unpleasantly large amount. I predict that after the initial euphoria, a LOT of people are going to face some nasty surprises next spring. So far I haven't seen even the tiniest bit of help for this from either the IRS or my employer. So...if your tax situation is more complicated than pure wage income and standard deduction for 2017 and 2018, be warned you may have to do what I just did!

I tried Taxcaster and a number of online calculators, but it appears Taxcaster is still using pre-2018 rules, the IRS site is still down, and the online calculators all turned out to have errors or some fatal limitation. I finally did the calculations myself, having finished my 2017 taxes and downloaded a recent paycheck.

First, subtract total pretax deductions from gross pay on paycheck to get taxable pay.
Working from your 2017 return, hand-calculate expected 2018 taxes and determine amount of withholding required per pay period.
Go to this site: https://www.irs.gov/pub/irs-pdf/n1036.pdf
and find in the tables the withholding allowance amount for your pay periods. Multiply by the number of allowances you are claiming, and subtract this from your taxable pay.
Then find the withholding schedule for your filing category and apply the formula (X + Y% of amount over Z, where Y = your marginal tax bracket).

I ended up reducing my allowances from 6 to 2, in order to bring up withholding to slightly over the actual tax I'll have to pay (and make up for the withholding deficit I now have).
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