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Draft 2019 W4- they can't be serious!

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    Draft 2019 W4- they can't be serious!

    https://www.irs.gov/pub/irs-dft/fw4--dft.pdf

    If I'm following correctly, they are trying to make returns close to zero- no refund or balance due. Like everyone has a crystal ball about what will happen during the year, right? The way I'm calculating it, if lower paid spouse has an increase in pay and higher paid spouse does not file a new W4 they will end up with a balance due. Geez!

    #2
    W4 for 2019

    Originally posted by kathyc2 View Post
    https://www.irs.gov/pub/irs-dft/fw4--dft.pdf

    If I'm following correctly, they are trying to make returns close to zero- no refund or balance due. Like everyone has a crystal ball about what will happen during the year, right? The way I'm calculating it, if lower paid spouse has an increase in pay and higher paid spouse does not file a new W4 they will end up with a balance due. Geez!
    Look at the bright side: For the "I better get a refund!!" crowd, you get to prepare everyone's tax return twice.

    FE

    Comment


      #3
      It does state in the instruction that the employee isn't required to fill out lines 5-8. I would not instruct my clients to fill that out. It is none of the employer's business if you itemize or what credits you claim.
      You have the right to remain silent. Anything you say will be misquoted, then used against you.

      Comment


        #4
        W4 and incomplete information

        Originally posted by WhiteOleander View Post
        It does state in the instruction that the employee isn't required to fill out lines 5-8. I would not instruct my clients to fill that out. It is none of the employer's business if you itemize or what credits you claim.
        Well, OK, but that kinda defeats the underlying purpose of "accurate" employer withholding. Especially for line 8 (multi-job) scenarios.
        Such an approach to things could very quickly lead to a "GIGO scenario" re the accuracy of the total amount of taxes withheld by the employer.

        FE

        Comment


          #5
          I ran projections for majority of clients this year as to the effect of new laws and withholding for 2018. It looks like Iíll be doing it again next year.

          Weíll have to wait to see the formulas to see if they build in a ďcushionĒ like the current version of W4/formula does.
          With all the variables, I canít see how they will be able to produce the tables in Pub 15 like they did in the past. It will be quite cumbersome for companies to manually calculate withholding.

          I still have a couple companies on the old version of Peachtree where I manually update withholding tables and they donít have to have to purchase new software and buy payroll package annually. Iím guessing there are other software packages that this will affect also.

          I really donít like pushing more withholding to the higher earning spouse for a multitude of reasons. Unless there is a large disparity between earnings, Iíll probably continue to recommend that they both check the single box.

          Although the current version instructions had a way to calculate how many additional withholding to calculate additional withholding to adjust for child tax credit, the majority of people did not do so. With a line to actually enter child tax credit on the form instead of just in the instructions, Iím guessing a lot of people will do so without any consideration of how it will affect the refund.

          This is a major change to withholding calculations. I doubt the vast majority of wage earners will understand the consequences of filing the form. I hope preparers will take the time to understand it to help guide them, but I've seen too many preparers who just rely on software rather than using good old fashioned math calculations.

          Comment


            #6
            highest paying job

            "I really donít like pushing more withholding to the higher earning spouse for a multitude of reasons."

            Just curious why. For as long as I can remember, W-4 calculators usually want to do just that. It makes sense to me.

            Comment


              #7
              Not like this. Examples use 2018 rates.

              Say lower earner (LE) earns 50K and higher earner (HE) earns 75K. LE would have 2739 withheld calculated as 50.000-24000 (std deduction MFJ) for taxable income of 26,000 times 12%.

              HE would take the 75K plus the 50K less 24K for net of 101,000. Tax on this would be 14,099 less the 2739 withheld from LE of 2739 for a net of 11,360.

              The total withheld would be 14,099 which would be the same as the tax liability on return- hence zero refund/balance due.

              Now say LE actually ends up earning 60K. Their withholding would increase to 3,939 and and HE would remain the same for a total of 15.299. Actual tax on return would be 16,299 for a balance due of 1K. This comes from the difference of the 12% and 22% rates times the 10K additional pay.

              If instead of doing the above, they each file as single, HE would have 9,799 withheld and LE would have 4,369 (on 50K income) withheld for a total of 14,168 producing a $69 refund.

              Now if LE ends up earning 60K withholding would be 6,499 for a total of 16,299 which would be the same as tax liability on return.

              Furthermore, if they both check the married box and don't complete lines 5-9, tax withheld would be 7,038 for a balance due of 7,061. People need to have a complete understanding of how this new form works.
              Last edited by kathyc2; 06-12-2018, 10:42 AM.

              Comment


                #8
                Take it even a step further... for 2017 HE was 75K and claimed M0. LE earned 50K and claimed S0. With 16K of itemized deductions, they end up essentially even.

                They make the assumption that HE will continuing to claim M and LE will continuing to claim S will produce the same result. Disregarding lines 5-9 will also put them in the 7K balance due range.

                Comment


                  #9
                  Seems like everyone is chasing their tails.

                  Comment


                    #10
                    I already have clients calling asking how to fill out a W-4. This is really going to spike the call volume.
                    In other words, a democratic government is the only one in which those who vote for a tax can escape the obligation to pay it.
                    Alexis de Tocqueville

                    Comment


                      #11
                      Originally posted by DaveO View Post
                      I already have clients calling asking how to fill out a W-4. This is really going to spike the call volume.
                      Seems like there are a couple emails from IRS every week advising to check withholding.

                      Comment


                        #12
                        Originally posted by DaveO View Post
                        I already have clients calling asking how to fill out a W-4. This is really going to spike the call volume.
                        Not until 2019.

                        Comment


                          #13
                          Originally posted by kathyc2 View Post
                          https://www.irs.gov/pub/irs-dft/fw4--dft.pdf

                          If I'm following correctly, they are trying to make returns close to zero- no refund or balance due. Like everyone has a crystal ball about what will happen during the year, right? The way I'm calculating it, if lower paid spouse has an increase in pay and higher paid spouse does not file a new W4 they will end up with a balance due. Geez!
                          I recommend that couples submit the W-4s so that the higher income files married with # of dependents and the lower income spouse ALWAYS files Single zero. If they qualify for additional deductions then these should be reflected by the higher income increases # of dependents accordingly. This creates a low refund but they never owe.
                          Believe nothing you have not personally researched and verified.

                          Comment


                            #14
                            How many calls are you guys getting from your clients to help them with W-4?

                            Over the last month, I seem to be averaging at least 4/5 calls per week because employers are telling their employees to check withholding and when they go to the IRS calculator they get confused and want me to help them. It gets complicated if both spouses are working and they have children and other sources of income with no withholding. I have a feeling some folks may be under withholding and they will get the shock of their life at tax season!

                            I have been advising most of my clients to stay the course for at least one year and next year after the 2018 returns are done we can revisit.

                            How are you advising your clients?
                            Taxes after all are the dues that we pay for the privileges of membership in an organized society. - FDR

                            Comment


                              #15
                              Originally posted by ATSMAN View Post
                              Over the last month, I seem to be averaging at least 4/5 calls per week because employers are telling their employees to check withholding and when they go to the IRS calculator they get confused and want me to help them. It gets complicated if both spouses are working and they have children and other sources of income with no withholding. I have a feeling some folks may be under withholding and they will get the shock of their life at tax season!

                              I have been advising most of my clients to stay the course for at least one year and next year after the 2018 returns are done we can revisit.

                              How are you advising your clients?
                              I ran a projection for most clients as part as 2017 prep. I had set up an Excel sheet to do the math so I didn't have to keep inventing the wheel. I could do most in less than 2 minutes.

                              For those that aren't Excel savvy, I'd recommend the following:

                              Calculate projected 2018 liability either maually or from tax software.
                              Calculate what will be withheld from annual percentage table methods in Pub 15. Decrease annual pay used in calculations by 4,150 to each exemption claimed. For example using S0 earning 50,000 run the math from the tables to calculate withholding. In this situation it would be 6,126. If instead they claim 1, use 45,850 to run the math- it should produce an answer of 5,213.
                              Claiming one less exemption will equal 4,150 times the marginal rate from that W4/W2 withheld. In this case 4,150 x .22=913. Keep in mind that since we are essentially 1/2 way through year a change made now will only have 1/2 the annual calculated effect.

                              The people that will be most adversely affected are people without children under 17 who currently itemize and won't be able to in 2018, or people who's itemized deductions in 2018 will be curtailed (10K state limit, 2% items not allowed).

                              Most people that get the child tax credit will be okay as the 1K additional credit should offset reduced refund from the withholding tables.

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