New tax law and changes to paycheck

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am
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New tax law and changes to paycheck

Post by am » Sat Jan 20, 2018 10:19 am

My understanding is that the tax law will impact paychecks next month. I was looking for a calculator that would estimate the new amount once the changes take effect. This one that I have used in the past does not: https://www.paycheckcity.com/calculator/salary/

Also, will most people need to change their w4 form? I don’t want to have to write a check to the IRS when I do taxes in 2019. Thanks.

emoore
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Re: New tax law and changes to paycheck

Post by emoore » Sat Jan 20, 2018 10:39 am

am wrote:
Sat Jan 20, 2018 10:19 am
My understanding is that the tax law will impact paychecks next month. I was looking for a calculator that would estimate the new amount once the changes take effect. This one that I have used in the past does not: https://www.paycheckcity.com/calculator/salary/

Also, will most people need to change their w4 form? I don’t want to have to write a check to the IRS when I do taxes in 2019. Thanks.
You can calculate your own withholding tax from the new withholding tables. Also you can use one of the 2018 tax calculators to estimate how much tax you will owe for 2018 and then adjust your W4 form from there. That's what I'm doing. If I keep my exemptions the same as last year I will wind up owing taxes at the end of the year.

nolesrule
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Re: New tax law and changes to paycheck

Post by nolesrule » Sat Jan 20, 2018 10:44 am

I just ran my pay check Federal taxable income amount through paycheckcity and the tax withholding amount shown was based on the 2018 tax law changes (which matched my manual calculation), not 2017 numbers (which would have matched my first paycheck of 2018).

am
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Re: New tax law and changes to paycheck

Post by am » Sat Jan 20, 2018 10:50 am

emoore wrote:
Sat Jan 20, 2018 10:39 am
am wrote:
Sat Jan 20, 2018 10:19 am
My understanding is that the tax law will impact paychecks next month. I was looking for a calculator that would estimate the new amount once the changes take effect. This one that I have used in the past does not: https://www.paycheckcity.com/calculator/salary/

Also, will most people need to change their w4 form? I don’t want to have to write a check to the IRS when I do taxes in 2019. Thanks.
You can calculate your own withholding tax from the new withholding tables. Also you can use one of the 2018 tax calculators to estimate how much tax you will owe for 2018 and then adjust your W4 form from there. That's what I'm doing. If I keep my exemptions the same as last year I will wind up owing taxes at the end of the year.
I just ran a check for the end of Feb and my pay amount is slightly lower than I got during the first two pay periods of Jan 2018 and about the same as Jan 2017. My tax savings with the new law according to some calculators I have used are in the 15-20k range so I am assuming the new changes are not being applied?

nolesrule
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Re: New tax law and changes to paycheck

Post by nolesrule » Sat Jan 20, 2018 11:01 am

am wrote:
Sat Jan 20, 2018 10:50 am
emoore wrote:
Sat Jan 20, 2018 10:39 am
am wrote:
Sat Jan 20, 2018 10:19 am
My understanding is that the tax law will impact paychecks next month. I was looking for a calculator that would estimate the new amount once the changes take effect. This one that I have used in the past does not: https://www.paycheckcity.com/calculator/salary/

Also, will most people need to change their w4 form? I don’t want to have to write a check to the IRS when I do taxes in 2019. Thanks.
You can calculate your own withholding tax from the new withholding tables. Also you can use one of the 2018 tax calculators to estimate how much tax you will owe for 2018 and then adjust your W4 form from there. That's what I'm doing. If I keep my exemptions the same as last year I will wind up owing taxes at the end of the year.
I just ran a check for the end of Feb and my pay amount is slightly lower than I got during the first two pay periods of Jan 2018 and about the same as Jan 2017. My tax savings with the new law according to some calculators I have used are in the 15-20k range so I am assuming the new changes are not being applied?
Slightly less may be accurate. Take a look at the withholding table calculations for 2018 here: https://www.irs.gov/pub/irs-prior/n1036--2018.pdf

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Taz
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Re: New tax law and changes to paycheck

Post by Taz » Mon Jan 22, 2018 6:47 am

Last week I updated our payroll module with the 2018 tables. Everyone's take home pay increased. No complaints.

Since we are a small company, I'll remind folks mid-summer to estimate their tax situation - especially those who are married - to make sure the withholding is in the ballpark.
The destination matters.

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samsoes
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Re: New tax law and changes to paycheck

Post by samsoes » Mon Jan 22, 2018 6:59 am

am wrote:
Sat Jan 20, 2018 10:19 am

Also, will most people need to change their w4 form? I don’t want to have to write a check to the IRS when I do taxes in 2019. Thanks.
Yes!

I calculated that my paycheck take-home amount will increase about $30. Great. However, when I calculate for the entire year (I have a home-grown spreadsheet which I meticulously maintain), I will owe over $3k, compared to a modest refund I typically receive. :oops: This is due to SALT limitations and elimination of personal exemptions (single, no dependents, very high tax state).

I recall after the tax reform of 1986, all employees were required to fill-out a new W4 to account for year-end surprises. That's what I'll be doing shortly.
"Happiness Is Not My Companion" - Gen. Gouverneur K. Warren. | (Avatar is the statue of Gen. Warren atop Little Round Top @ Gettysburg National Military Park.)

cherijoh
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Re: New tax law and changes to paycheck

Post by cherijoh » Mon Jan 22, 2018 7:55 am

am wrote:
Sat Jan 20, 2018 10:19 am
My understanding is that the tax law will impact paychecks next month. I was looking for a calculator that would estimate the new amount once the changes take effect. This one that I have used in the past does not: https://www.paycheckcity.com/calculator/salary/

Also, will most people need to change their w4 form? I don’t want to have to write a check to the IRS when I do taxes in 2019. Thanks.
irrespective of the tax law change, I have always waited until March to check and see if I need to adjust my W-4. We get a "bonus" in February and also get our new compensation figures. I don't really understand everyone's concern about having to have it correct from the very first paycheck - there is plenty of time to make course corrections. Just don't wait until late in the year to check and see how you are doing! :oops:

For anyone with a straightforward tax situation (e.g., not currently subject to AMT) it is likely to boil down to itemized vs. standard deductions, the elimination of personal exemptions and the new child and dependent tax credit. So it shouldn't be that difficult to get a ballpark estimate of your taxes to check against withholding amounts. As far as I know, the safe harbors on underpayment of taxes still stand - within $1K of taxes owed, paid 90% or more of current yera's obligation, and paid 100 or 110% of last year's obligation (percentage depending on income).

cherijoh
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Re: New tax law and changes to paycheck

Post by cherijoh » Mon Jan 22, 2018 8:05 am

samsoes wrote:
Mon Jan 22, 2018 6:59 am
am wrote:
Sat Jan 20, 2018 10:19 am

Also, will most people need to change their w4 form? I don’t want to have to write a check to the IRS when I do taxes in 2019. Thanks.
Yes!

I calculated that my paycheck take-home amount will increase about $30. Great. However, when I calculate for the entire year (I have a home-grown spreadsheet which I meticulously maintain), I will owe over $3k, compared to a modest refund I typically receive. :oops: This is due to SALT limitations and elimination of personal exemptions (single, no dependents, very high tax state).

I recall after the tax reform of 1986, all employees were required to fill-out a new W4 to account for year-end surprises. That's what I'll be doing shortly.
There is absolutely no way for the W-4 to account for the SALT limitations since it hits people so unequally. But with fewer people itemizing, I would think that the new W-4 would be more accurate for people who get the majority of their income from salary.

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samsoes
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Re: New tax law and changes to paycheck

Post by samsoes » Mon Jan 22, 2018 8:39 am

cherijoh wrote:
Mon Jan 22, 2018 8:05 am
samsoes wrote:
Mon Jan 22, 2018 6:59 am
am wrote:
Sat Jan 20, 2018 10:19 am

Also, will most people need to change their w4 form? I don’t want to have to write a check to the IRS when I do taxes in 2019. Thanks.
Yes!

I calculated that my paycheck take-home amount will increase about $30. Great. However, when I calculate for the entire year (I have a home-grown spreadsheet which I meticulously maintain), I will owe over $3k, compared to a modest refund I typically receive. :oops: This is due to SALT limitations and elimination of personal exemptions (single, no dependents, very high tax state).

I recall after the tax reform of 1986, all employees were required to fill-out a new W4 to account for year-end surprises. That's what I'll be doing shortly.
There is absolutely no way for the W-4 to account for the SALT limitations since it hits people so unequally. But with fewer people itemizing, I would think that the new W-4 would be more accurate for people who get the majority of their income from salary.
I'll keep my current number of exemptions, but include an "additional amount" of $125 per paycheck based on my calculations*. I realize that the average person isn't as meticulous about these things as I am, and don't have a mechanism to do a year-end projection (and don't use a real CPA like other folks). HR departments should run with this one. Otherwise, tax time in the spring of 2019 might be ugly.

(*This is all contingent on me not pulling the ripcord and bailing from Megacorp while there is still something left of my soul.)
Last edited by samsoes on Mon Jan 22, 2018 8:40 am, edited 1 time in total.
"Happiness Is Not My Companion" - Gen. Gouverneur K. Warren. | (Avatar is the statue of Gen. Warren atop Little Round Top @ Gettysburg National Military Park.)

hightower
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Re: New tax law and changes to paycheck

Post by hightower » Mon Jan 22, 2018 8:39 am

FWIW, don't expect changes anytime soon. My HR dept told me it would likely be April or May before the changes finally take effect on our paycheck :shock:

lazydavid
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Re: New tax law and changes to paycheck

Post by lazydavid » Mon Jan 22, 2018 8:49 am

hightower wrote:
Mon Jan 22, 2018 8:39 am
FWIW, don't expect changes anytime soon. My HR dept told me it would likely be April or May before the changes finally take effect on our paycheck :shock:
Then report them to IRS. They are required by law to have the new withholding tables in effect by February 15th.

lstone19
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Re: New tax law and changes to paycheck

Post by lstone19 » Mon Jan 22, 2018 9:03 am

lazydavid wrote:
Mon Jan 22, 2018 8:49 am
hightower wrote:
Mon Jan 22, 2018 8:39 am
FWIW, don't expect changes anytime soon. My HR dept told me it would likely be April or May before the changes finally take effect on our paycheck :shock:
Then report them to IRS. They are required by law to have the new withholding tables in effect by February 15th.
My wife's employer sent out an email saying the new tables would be applied starting with this Friday's (1/26) check.

I agree that 4/15/19 could be ugly for a lot of people. Fortunately, we're at a point where I don't care (have sufficient cash to deal with it). With much of our income from non-withheld sources (I opt out of withholding where permitted), my method for years has been determine the safe harbor amount (100% (or 110% for high-income taxpayers) of the previous year's tax), then on the four estimated due dates, determine the appropriate percent of the safe harbor amount (e.g 25% on 4/15), subtract YTD withholding, and pay the balance as estimated tax. If we then end up owing more on the 1040, so be it. If a refund, apply it to next year's estimate as we'll just be sending it back on 4/15 otherwise. Our W-2 income is sufficiently variable that I do not make any attempt to estimate up front how much will be withheld during the year.

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FiveK
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Re: New tax law and changes to paycheck

Post by FiveK » Mon Jan 22, 2018 9:06 am

hightower wrote:
Mon Jan 22, 2018 8:39 am
FWIW, don't expect changes anytime soon. My HR dept told me it would likely be April or May before the changes finally take effect on our paycheck :shock:
It's not that hard. There's no good reason why your HR dept. shouldn't be able to change a few numbers in the withholding lookup tables. Might take all of an hour.

And then there's the IRS guidance that employers should begin using the 2018 withholding tables as soon as possible, but not later than Feb. 15, 2018. Don't know if that rises to the level of "law", but again there's no good reason for HR not to do it.

lstone19
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Re: New tax law and changes to paycheck

Post by lstone19 » Mon Jan 22, 2018 9:21 am

FiveK wrote:
Mon Jan 22, 2018 9:06 am
It's not that hard. There's no good reason why your HR dept. shouldn't be able to change a few numbers in the withholding lookup tables. Might take all of an hour.
[/quote]

I agree it's not that hard. Since my wife's hours (contract consultant) and rate can vary a lot, I have a spreadsheet that I can plop her hours into and know what the next check will be within a few pennies. The formula I use, which is for her with a Single/0 W-4 with a biweekly payroll, is:

=IF(I8<142,0,IF(I8<509,(I8-142)*0.1,IF(I8<1631,(I8-509)*0.12+36.7,IF(I8<3315,(I8-1631)*0.22+171.34,IF(I8<6200,(I8-3315)*0.24+541.82,IF(I8<7835,(I8-6200)*0.32+1234.22,IF(I8<19373,(I8-7835)*0.35+1757.42,(I8-19373)*0.37+5795.72)))))))

where cell I8 is the taxable gross. If you look at IRS Notice 1036 (https://www.irs.gov/pub/irs-pdf/n1036.pdf), you'll see all the numbers in the formula come right out of the Biweekly/Single table (the formula or calculation of taxable gross will require adjustment to account for exemptions but since we always use 0, I didn't include it).

Alan S.
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Re: New tax law and changes to paycheck

Post by Alan S. » Mon Jan 22, 2018 11:40 am

Anyone know if the withholding in the new tables is adjusted ( reduced) to make up for the 4-6 weeks of higher withholding from the former tables?

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FiveK
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Re: New tax law and changes to paycheck

Post by FiveK » Mon Jan 22, 2018 12:07 pm

Alan S. wrote:
Mon Jan 22, 2018 11:40 am
Anyone know if the withholding in the new tables is adjusted ( reduced) to make up for the 4-6 weeks of higher withholding from the former tables?
No, it is not.

"Single with 2 allowances" and "Married with 3 allowances" line up perfectly with the Single and MFJ tax brackets.

Diogenes
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Re: New tax law and changes to paycheck

Post by Diogenes » Mon Jan 22, 2018 12:32 pm

Looking at making changes to the quarterly payments. Following the Tax Cuts and Jobs Act, my bill will decrease about $5K!
Nice! It will go back into the business, but still very positive and significant.

ImUrHuckleberry
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Re: New tax law and changes to paycheck

Post by ImUrHuckleberry » Mon Jan 22, 2018 1:30 pm

emoore wrote:
Sat Jan 20, 2018 10:39 am
am wrote:
Sat Jan 20, 2018 10:19 am
My understanding is that the tax law will impact paychecks next month. I was looking for a calculator that would estimate the new amount once the changes take effect. This one that I have used in the past does not: https://www.paycheckcity.com/calculator/salary/

Also, will most people need to change their w4 form? I don’t want to have to write a check to the IRS when I do taxes in 2019. Thanks.
You can calculate your own withholding tax from the new withholding tables. Also you can use one of the 2018 tax calculators to estimate how much tax you will owe for 2018 and then adjust your W4 form from there. That's what I'm doing. If I keep my exemptions the same as last year I will wind up owing taxes at the end of the year.
Based on the new tables I just had to change my allowances from 3 to 0 and I'm still slightly under-withholding for what I think we'll owe in 2018 based on the new tax plan.

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whodidntante
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Re: New tax law and changes to paycheck

Post by whodidntante » Mon Jan 22, 2018 1:35 pm

I assume my withholding is wrong and take it upon myself to correct it each year. I want to withhold as little as possible while landing in a safe harbor.

ImUrHuckleberry
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Re: New tax law and changes to paycheck

Post by ImUrHuckleberry » Mon Jan 22, 2018 1:38 pm

I shoot for getting about $200 refund just to cover for my back-of-envelope calculations.

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