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Be sure to check your tax estimates for 2018

Posted: Tue Sep 25, 2018 8:04 am
by bethanybeachreader
I just got a shock this morning. I went to the IRS site and instead of breaking even every year, I will owe $2k next year. Yes, my total tax bill in 2018 is less than 2017, but not enough is being withheld in my paycheck to cover my tax liability. I just assumed all year that I would still break even with the tax changes that occurred this year.

Re: Be sure to check your tax estimates for 2018

Posted: Tue Sep 25, 2018 8:07 am
by PFInterest
they changed the withholding calculation.
plenty of time to adjust still.

Re: Be sure to check your tax estimates for 2018

Posted: Tue Sep 25, 2018 8:09 am
by bethanybeachreader
Yep, adjusted my W4 this morning.

Re: Be sure to check your tax estimates for 2018

Posted: Tue Sep 25, 2018 8:16 am
by coupleofcents
Yes, I've spent a good amount of time calculating. I'm finding differences between exemptions/child tax credits are impacting me. I will also still itemize deductions since I will have more than $24,000 for a married couple.

I will have to wait and see how it all shakes out.

Re: Be sure to check your tax estimates for 2018

Posted: Tue Sep 25, 2018 9:14 am
by SimonJester
Keep in mind I have found the IRS withholding calculator to be off by 1 paycheck depending when in the month you run it...

I have a spreadsheet I am using to more accurately calculate when I will owe.

Re: Be sure to check your tax estimates for 2018

Posted: Tue Sep 25, 2018 10:58 am
by OnLevel
SimonJester wrote: Tue Sep 25, 2018 9:14 am Keep in mind I have found the IRS withholding calculator to be off by 1 paycheck depending when in the month you run it...

I have a spreadsheet I am using to more accurately calculate when I will owe.
I second the bolded. Whenever I use it, the IRS calculations miss one paycheck.

Re: Be sure to check your tax estimates for 2018

Posted: Tue Sep 25, 2018 10:58 am
by Madbull
bethanybeachreader wrote: Tue Sep 25, 2018 8:04 am I just got a shock this morning. I went to the IRS site and instead of breaking even every year, I will owe $2k next year. Yes, my total tax bill in 2018 is less than 2017, but not enough is being withheld in my paycheck to cover my tax liability. I just assumed all year that I would still break even with the tax changes that occurred this year.
The issue from my understanding is that when the Feds initially provided updated withholding tables to employers, they were not accurate, resulting in under-withholding. Supposedly, they provided updated tables that more closely matched anticipated liabilities. Those tables aimed to more closely mirror what folks owed, (resulting in less refunds at tax time but more in our pockets paycheck to paycheck).

My only question is if updated tables were indeed provided to employers, why didn't the amount being withheld increase at some point? My employer still can't give me a straight answer about that part of things. (The only increase to the amount being withheld from my paychecks is the flat $ amount I submitted to them, if I hadn't done that, nothing would've changed)..... Hmmmm. :?

Re: Be sure to check your tax estimates for 2018

Posted: Tue Sep 25, 2018 2:48 pm
by nolesrule
Madbull wrote: Tue Sep 25, 2018 10:58 am
bethanybeachreader wrote: Tue Sep 25, 2018 8:04 am I just got a shock this morning. I went to the IRS site and instead of breaking even every year, I will owe $2k next year. Yes, my total tax bill in 2018 is less than 2017, but not enough is being withheld in my paycheck to cover my tax liability. I just assumed all year that I would still break even with the tax changes that occurred this year.
The issue from my understanding is that when the Feds initially provided updated withholding tables to employers, they were not accurate, resulting in under-withholding. Supposedly, they provided updated tables that more closely matched anticipated liabilities. Those tables aimed to more closely mirror what folks owed, (resulting in less refunds at tax time but more in our pockets paycheck to paycheck).

My only question is if updated tables were indeed provided to employers, why didn't the amount being withheld increase at some point? My employer still can't give me a straight answer about that part of things. (The only increase to the amount being withheld from my paychecks is the flat $ amount I submitted to them, if I hadn't done that, nothing would've changed)..... Hmmmm. :?
Withholding tables were switched from 2017 to 2018 sometime around the end of January, and your payroll should have followed suit. There was not a second table change.

The issue is that allowances play differently with the change to the standard deduction and elimination of the personal exemption, so that your 2017 W-4 allowances aren't compatible with the 2018 allowances excpet for a very small range.

This has been talked about since the 2018 tables came out, and even with the 5 minutes I'm in the car everyday I hear CPA firm advertisements warning about under-withholding.

Our tax liability is going down, but we had to more than double our additional withholding in order to be close to our liability.

Re: Be sure to check your tax estimates for 2018

Posted: Tue Sep 25, 2018 3:15 pm
by jebmke
I do taxes for TaxAide. In my state, I think the biggest surprise many of our clients get this year will be on their state taxes. Quite a few of our taxpayers are going to get hammered on state taxes - probably more than they save on Federal. Going to be a lot of tough conversations.

Re: Be sure to check your tax estimates for 2018

Posted: Tue Sep 25, 2018 3:32 pm
by HereToLearn
jebmke wrote: Tue Sep 25, 2018 3:15 pm I do taxes for TaxAide. In my state, I think the biggest surprise many of our clients get this year will be on their state taxes. Quite a few of our taxpayers are going to get hammered on state taxes - probably more than they save on Federal. Going to be a lot of tough conversations.
My mother employs in-home care aides, and I have been trying to help them estimate the amount they should have withheld by the payroll company I have hired to handles the taxes. Working for my mother is a second job for these women, so I have to consider their earnings and taxes paid at their primary jobs. I have found that both will receive a federal refund but both will owe a small amount in state taxes. The federal 'refund' will cover their full federal liability for the money earned working for my mother, so I only need to withhold state & FICA.

Of course, I am not confident in these online tax calculators.

Re: Be sure to check your tax estimates for 2018

Posted: Tue Sep 25, 2018 3:45 pm
by jebmke
HereToLearn wrote: Tue Sep 25, 2018 3:32 pm My mother employs in-home care aides, and I have been trying to help them estimate the amount they should have withheld by the payroll company I have hired to handles the taxes.
We serve a number of people in what I would term, non-traditional situations. Some health care jobs as well as some other industries. Often they have significant un-reimbursed expenses such as uniforms, travel, small tools/equipment that they historically could deduct on Schedule A. That entire section was repealed. They will lose this deduction and the higher standard deduction and lower tax rates may not be enough to make up for it.

Re: Be sure to check your tax estimates for 2018

Posted: Tue Sep 25, 2018 3:49 pm
by Starfish
bethanybeachreader wrote: Tue Sep 25, 2018 8:04 am I just got a shock this morning. I went to the IRS site and instead of breaking even every year, I will owe $2k next year. Yes, my total tax bill in 2018 is less than 2017, but not enough is being withheld in my paycheck to cover my tax liability. I just assumed all year that I would still break even with the tax changes that occurred this year.


Interest free money? Yay.

Re: Be sure to check your tax estimates for 2018

Posted: Tue Sep 25, 2018 3:54 pm
by 260chrisb
Made adjustments today for Q4! Thanks for the reminder.

Re: Be sure to check your tax estimates for 2018

Posted: Tue Sep 25, 2018 4:16 pm
by HereToLearn
jebmke wrote: Tue Sep 25, 2018 3:45 pm
HereToLearn wrote: Tue Sep 25, 2018 3:32 pm My mother employs in-home care aides, and I have been trying to help them estimate the amount they should have withheld by the payroll company I have hired to handles the taxes.
We serve a number of people in what I would term, non-traditional situations. Some health care jobs as well as some other industries. Often they have significant un-reimbursed expenses such as uniforms, travel, small tools/equipment that they historically could deduct on Schedule A. That entire section was repealed. They will lose this deduction and the higher standard deduction and lower tax rates may not be enough to make up for it.
Oh....I didn't even think of Schedule A in that way.

In this case, I think the women work night shifts at nursing homes and then a couple of four-hour shifts at my mother's house. (I should have hired through an agency to save myself becoming this involved in many aspects of the employer-employee relationship.) I don' know if they would have any of the deductions you referenced.

Re: Be sure to check your tax estimates for 2018

Posted: Tue Sep 25, 2018 4:24 pm
by UpperNwGuy
bethanybeachreader wrote: Tue Sep 25, 2018 8:04 am I just got a shock this morning. I went to the IRS site and instead of breaking even every year, I will owe $2k next year. Yes, my total tax bill in 2018 is less than 2017, but not enough is being withheld in my paycheck to cover my tax liability. I just assumed all year that I would still break even with the tax changes that occurred this year.
Does the IRS website have an online tax calculator for 2018, or did you use the tax tables?

Re: Be sure to check your tax estimates for 2018

Posted: Tue Sep 25, 2018 4:30 pm
by Jack FFR1846
So witholding was sent to employers on the low side so us employee saps would think we're taking home more money when in fact, we're going to get hammered in April? Yah, I saw it coming and made changes early in the year and am even sending in estimated payments, just in case. I could care less if I'm giving the government a free loan.....I HATE owing taxes after getting back the verdict from my tax guy.

Re: Be sure to check your tax estimates for 2018

Posted: Tue Sep 25, 2018 5:47 pm
by FiveK
UpperNwGuy wrote: Tue Sep 25, 2018 4:24 pm Does the IRS website have an online tax calculator for 2018, or did you use the tax tables?
The 2018 Withholding Calculator site has to have some tax calculations embedded, but it doesn't provide details.

For estimating 2018 taxes, the "what if?" worksheets of TurboTax, TaxAct, etc. may be the most accurate if one has an extremely complex situation.

If one has merely a "somewhat complex" situation, various web-based and spreadsheet programs are available. To date, the personal finance toolbox spreadsheet has been the most accurate (i.e., using 2018 instead of 2017 tables, including more credits, phaseouts, etc.).

Re: Be sure to check your tax estimates for 2018

Posted: Tue Sep 25, 2018 6:13 pm
by Madbull
nolesrule wrote: Tue Sep 25, 2018 2:48 pm Our tax liability is going down, but we had to more than double our additional withholding in order to be close to our liability.
I guess this is my issue with this whole mess. While I am thrilled if our liability truly is less at the end of the day, I shouldn’t have to mess around with the IRS calculator and speak to our tax guy to be informed we need to increase the amount withheld from our pay, outside of the ‘standard’ options on a W4, especially when we don’t have any special circumstances, (don’t make a ton, no kids, don’t own a business.....just a couple of ‘low-middle income’ W2 people that are married).

We already both claim Married-0, there is no reason that shouldn’t cover our liability to the Feds imo.

Re: Be sure to check your tax estimates for 2018

Posted: Tue Sep 25, 2018 6:55 pm
by nolesrule
Madbull wrote: Tue Sep 25, 2018 6:13 pm
nolesrule wrote: Tue Sep 25, 2018 2:48 pm Our tax liability is going down, but we had to more than double our additional withholding in order to be close to our liability.
I guess this is my issue with this whole mess. While I am thrilled if our liability truly is less at the end of the day, I shouldn’t have to mess around with the IRS calculator and speak to our tax guy to be informed we need to increase the amount withheld from our pay, outside of the ‘standard’ options on a W4, especially when we don’t have any special circumstances, (don’t make a ton, no kids, don’t own a business.....just a couple of ‘low-middle income’ W2 people that are married).

We already both claim Married-0, there is no reason that shouldn’t cover our liability to the Feds imo.
Claiming married was originally designed for a single earner household.

The W-4 has never really scaled properly, particularly for multiple earners. There's a reason there are instructions for calculating the correct allowances or additional withholding based on multiple earner situations. Say you make combined $150k, total taxes withheld will be different if it's $150k/$0k, $100k/$50k or $75k/$75k.

Re: Be sure to check your tax estimates for 2018

Posted: Tue Sep 25, 2018 7:03 pm
by randomizer
I'd be thrilled if I only owed $2k next year. Due to extreme uncertainty about stuff this year, however, I am very likely to have significantly underheld.

Re: Be sure to check your tax estimates for 2018

Posted: Tue Sep 25, 2018 7:17 pm
by FiveK
Madbull wrote: Tue Sep 25, 2018 6:13 pm I guess this is my issue with this whole mess. While I am thrilled if our liability truly is less at the end of the day, I shouldn’t have to mess around with the IRS calculator and speak to our tax guy to be informed we need to increase the amount withheld from our pay, outside of the ‘standard’ options on a W4, especially when we don’t have any special circumstances, (don’t make a ton, no kids, don’t own a business.....just a couple of ‘low-middle income’ W2 people that are married).
We already both claim Married-0, there is no reason that shouldn’t cover our liability to the Feds imo.
If, for example, you each earned $80K with no other income or deductions, in 2017
- your MFJ tax would have been $26,278
- your combined withholding (see p. 46) with both Married-0 would have been $19,540.

In other words, many 2-earner households had to sharpen the pencil to figure withholding in 2017, and 2018 brought many tax code changes....

Re: Be sure to check your tax estimates for 2018

Posted: Tue Sep 25, 2018 7:20 pm
by Madbull
nolesrule wrote: Tue Sep 25, 2018 6:55 pm Claiming married was originally designed for a single earner household....
Perhaps, but it’s not 1950 anymore, and is yet another example of our inept tax system, (even moreso with what it’s doing this tax year to people). /rant off

We also haven’t had any issues previously both claiming M-0, (usually averaged only about a ~300 overpayment throughout the year), yet this year are having to set aside a few thousand more.

That, to me, equals broken.

Re: Be sure to check your tax estimates for 2018

Posted: Tue Sep 25, 2018 7:49 pm
by Traveler
Assuming I included everything I was supposed to on the IRS calculator, I will owe $356 on an income of >$150K. This is ideal - don't owe much and don't have a large refund.

Re: Be sure to check your tax estimates for 2018

Posted: Wed Sep 26, 2018 7:46 am
by nolesrule
Madbull wrote: Tue Sep 25, 2018 7:20 pm
nolesrule wrote: Tue Sep 25, 2018 6:55 pm Claiming married was originally designed for a single earner household....
Perhaps, but it’s not 1950 anymore, and is yet another example of our inept tax system, (even moreso with what it’s doing this tax year to people). /rant off

We also haven’t had any issues previously both claiming M-0, (usually averaged only about a ~300 overpayment throughout the year), yet this year are having to set aside a few thousand more.

That, to me, equals broken.
You can't really make it work properly for all scenarios once you introduce multiple earners due to the independent withholding for each pay source. In a 2 earner scenario, if one salary gets you to the 22% bracket, then the second salary needs to be withheld starting at 22% to make the math work.

Conversely, if married worked the way you expected it to, then M0 would not work for the single earner household and would be extremely over-withheld as a result.

I suggest you actually read through the W-4 instructions and understand how they work. You may have just lucked into the fact that M0 worked for you in the past without any adjustments. It hasn't worked for us in the last 10 years. And if your dual salaries increases outpace the inflation of the tax brackets, you'll find that the results are going to diverge from your expectations, whether under the current or pre-2018 system.

Re: Be sure to check your tax estimates for 2018

Posted: Wed Sep 26, 2018 11:20 pm
by Tamales
Thanks to the OP for posting this. I had been reluctant to go through the estimate process since I have a somewhat complicated scenario, with lumpy and variable inputs but after making some rough estimates, the calculator claims I'd owe over 6 grand (even with adding a fixed federal withholding amount to my W4 beginning a couple months ago). I don't quite understand how that's possible, so I have some tracking down to do. I didn't think I needed to do this before now, given I was already adding to my w4 withholding in an amount I thought was safe, but it looks like I should just aim for hitting the previous year's safe-harbor withholding threshold.