With the recent changes to the tax code as a result of the Tax Cuts and Jobs Act (TCJA) signed into law by President Donald Trump, the Internal Revenue Service has issued guidance to taxpayers over potential issues pertaining to withholdings and reporting. The IRS is warning retirees in particular, as the new tax regulations may alter the amount of federal income tax that is withheld from pensions or annuities.
According to an IRS press release, “among other reforms, the new law changed the tax rates and brackets, increased the standard deduction, removed personal exemptions and limited or discontinued certain deductions. As a result, many taxpayers may need to raise or lower the amount of tax they pay during the year.”
The IRS notes that most taxpayers should already see changes to their paychecks since the end of February 2018. Any adjustments, however, are dependent upon whether your employer or pension payer made the necessary changes, or if a new W-4 or W-4P form was filled out. Because of this, it is essential all taxpayers check to make sure they do not underpay their taxes.
IRS Paycheck Check-Ups
To ensure those affected by the new tax regulations avoid receiving penalties come spring, the IRS is urging all taxpayers to perform what is known as a ”paycheck check-up,” immediately. For those who are concerned they may underreport their tax burden, the IRS provides a withholding calculator to help estimate how much tax should be withheld from each paycheck. There are several reasons why you should use this calculator to check your withholdings, including:
- Preventing too little tax from being paid, resulting in an unexpectedly large tax bill come tax return time.
- You may choose to receive more in your paycheck and have less withheld for taxes.
- Employees can determine if they need to provide their employer with a new W-4 form.
- Those with pensions can determine if they need to provide their payer with a new W-4P form.
For more information on how the Tax Cuts and Jobs Act may affect your taxes, check out the IRS fact sheet on the reforms, or contact an experienced tax attorney today.
Contact an Experienced Michigan Tax Attorney Today
Understanding the complexities of the newly enacted Tax Cuts and Jobs Act can be difficult; therefore, it is essential that you contact an experienced tax attorney immediately. Failure to fully understand and comply with new IRS tax regulations may result in an underpayment of tax and severe financial penalties. If you are facing penalties from the IRS, you need a tax law firm that is willing to fight for you.
At Ayar Law, we represent people and businesses with state and federal tax problems that require creative solutions. We focus entirely on resolving tax problems and giving our clients a fresh start. We strive to get you the best solution for your situation. So, if you’re having tax troubles call Ayar Law today at (248) 262-3400 for a free, no-obligation consultation.