How many of you have already filed your tax return and received a refund that was lower than previous years? There are many possible reasons but one may be that you had less federal withholding deducted from your paycheck in 2018.
Recall that about this time last year, the hype was that employees would be seeing a larger net paycheck. Who didn't want that?! IRS accomplished this by changing the withholding tables to have less federal withholding deducted from paychecks. Instead of a larger refund at tax time, you received it throughout the year. Not liking that? Many people rely on the refund as their savings account to pay their real estate taxes or pay for vacation.
You can complete a new Form W-4 to give to your employer to have more federal withholding deducted in 2019. On Line 5 of Form W-4, if you lower the number of allowances, your federal withholding will increase. For example, if you are currently claiming 2 allowances, you could change it to zero allowances. Another option is to request additional withholding on Line 6 of Form W-4. For example, you could have an additional $25 per paycheck federal withholding in addition to the calculated withholding.
In my next blog, I'll discuss the tax law changes in itemized deductions.
As always, I recommend that you discuss your situation with a tax professional. Tax time is the perfect time to discuss any changes for the upcoming year and plan for future years.