Millions of Tax Payers Could Wind Up Owing in 2018
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September 24, 2018

CBS News ran a story a couple of weeks ago entitled Millions of Tax Payers Could Wind Up Owing in 2018 that we thought was worthwhile to share with you. The story highlighted a Government Accountability Office (GAO) report  warning that more than 4.5 million taxpayers are at risk of not withholding enough to cover their income taxes. The GAO urges taxpayers to act now to adjust their withholding amounts.

As stated in the CBS News story, the Tax Cuts and Job Act (TCJA) limited or eliminated many itemized deductions claimed by millions of taxpayers. These include new limits on state and local tax deductions (SALT), a restriction on the amount you can deduct for home mortgage interest and the elimination of the deduction for job-related expenses.

Taxpayers who itemize deductions are at risk of owing Uncle Sam money in April if they do not adjust their withholdings ( Form W-4 ). The GAO studied different groups of taxpayers and determined that married taxpayers who itemize deductions, with two children under age 17, income exceeding $180,000 from one or more jobs and who have $20,000 or more in nonwage income (dividends, interest or capital gains) are highly likely to have to pay additional tax when they file next year.

The GAO recommends that taxpayers use the Withholding Calculator on the IRS website to see if they are withholding enough money to meet their tax obligation. The information you will need on hand is:
  • Estimated values for your income in 2018
  • Number of dependents you would claim
  • Estimate of your itemized deductions 
  • Amount of federal tax withheld on your last paycheck

The Withholdings Calculator will not allow you to enter an amount that exceeds $10,000 as a deduction for state and local taxes you paid this year because of the limit imposed by TCJA.  

Feel free to call any member of our team at 610-828-1900 with questions on your withholdings. You can also contact me at . We are always happy to help.
Martin C. McCarthy, CPA, CCIFP
Managing Partner
McCarthy & Company, PC

Disclaimer This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).