The Tax Cuts and Jobs Act made changes to the tax law that will affect the calculation of income tax for all individual tax filers in 2018. Changes were made to tax rates as well as deductions that can be claimed when computing taxable income.
Tax Withholdings Could Cause Issues
For 2018, individual taxpayers generally will be subject to penalties if they do not submit withholding and/or quarterly estimated payments equal to the smaller of 90 percent of the tax shown on their 2018 tax return or 100 percent of the tax shown on their 2017 tax return (110 percent if the taxpayer’s 2017 adjusted gross income was more than $150,000).
In response to the tax law changes, the IRS has updated its tables used to determine the amount of withholding tax withheld from an employee’s paycheck. When both the tax law changes and the changes to withholding tables are considered, many individual taxpayers will find themselves in a different tax situation than they have been in prior years. To assist taxpayers this year, the IRS encourages all individuals to use its withholding calculator . Keep in mind, however, the federal tax reform changes may also affect state income tax calculations.
Completing a review of withholding and estimated tax payments with your Eide Bailly tax professional can help ensure you remit an appropriate amount of withholding and estimated tax payments to the IRS and, if applicable, to state income tax authorities.
Contact your Eide Bailly professional to learn more about the benefits of completing a review of your income tax withholding and estimated tax payments.
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