2018 withholding and returns

[kathyc2]

I've had a least 1/2 dozen clients this week that will go from a refund in 2017 to a balance due in 2018. Reason is that although their 2018 liability will be less, it's not nearly as big of a reduction as the decrease in withholding taxes. I'm recommending they change their W-4's.

Just a heads up for others....

[Twin Turbo Z]

We've been advising clients of the same thing since day one. Some will change their W4, some will not. Like they say, "you can lead a horse to water" But at least they wont get sticker shock next year when their refunds are down. Well scratch that, some will forget the conversation. Have many that just dont hear a word you say. Now some will make out better even with lower with-holdings due to CTC and their income situation. Oh the joy of the up coming season !!!

[Rapid Robert]

Have many that just dont hear a word you say.

That's being generous. I think they simply don't understand.

[kathyc2]

I've been preaching to everyone the need to change/update their W4, especially since the "2018 version" is finally available from the IRS.

Are you suggesting clients muddle through the "new" W4 on their own?

[kathyc2]

I'm just the messenger, doing my job.

I do feel a professional responsibility to inform my clients of the need to file an updated Form W-4 with their employer. That also loosely falls into the general category of "common sense."

Quite frankly, I unofficially tell them the current (and to a certain extent prior) W-4s are a nightmare and essentially outside the scope of most human intelligence when the "worksheets" become involved. Make a best guess effort with the major issues (filing status, number of CTCs, etc) and somewhat hope for the best in 2018.

Even with my perhaps debatable tax knowledge, I don't plan to walk through my own Form W-4 in great detail. Aim high, then later adjust for windage as needed.

FE

The way number of dependents claimed and effect of such is really quite simple: 4,150 x marginal rate. For example: wages clearly in 12% bracket will have 498 more tax withheld if they claim 1 less exemption.

If they are on the cusp between brackets or changing between single or married it is more complex.

[kathyc2]

SWAG method and/or dart board remain my strongest recommendations.

To each their own.....

[Twin Turbo Z]

Just tell everyone to file single 0 and lets see what happens

[kathyc2]

BUT if you tell me you go through the W-4 worksheets, especially on pages 3 and 4, for every client. . .then I will be duly impressed. Actually, I would be in complete awe!

No, I don’t use the worksheets. Yes, for the majority of clients I calculate 2018 tax liability using 2017 data and also the reduction of 2018 withholding. Then compare the reduction of tax to reduction of withholding.

With a background in corporate accounting, I totally understand how the tables in Pub 15 work, and I’m also quite proficient in Excel. I have a sheet set up that I can check all this in about 2 minutes and make a recommendation to change W4 based on their goals.

I wouldn’t expect that the majority of preparers have the background to look at it in the way I am doing. The point of the post is to inform that this is a real possibility, so they can make adjustments based on how they choose to calculate.
In most years the difference of refund/due won’t change much unless there are changes to situation. That is not true going from 2017 to 2018.

If my post causes a few people to look closer at 2018 numbers, great. If people like you want to pooh pooh what I have done and shared, that’s up to them.