Looks like we may have dodged the bullet on the hideous W4 they tried to put out last year. We'll still need to work on getting withholding correct especially when both spouses work, but the new version is much better. https://www.irs.gov/pub/irs-dft/fw4--dft.pdf
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Still a nightmare for the average taxpayer. I am not sure why the IRS is pushing so hard to change the format of the W4.
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"You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
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I don't think it's the IRS as much as Mnuchin.Comment
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No matter what changes they make to the W4 for next year, it would be prudent for us to review it with our clients, especially those that cut close and then complain that they have a large balance due. I have one client MFJ no dependents where the husband always puts 3 or 4 exemptions (same when kids were on the return) and refuses to change it. Poor wife always claims married 1. They always have a balance due and complain that friends and family are getting refunds and they don't so I must be missing something!Taxes after all are the dues that we pay for the privileges of membership in an organized society. - FDRComment
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If filled out per instructions, it would result in small if any refund. They either don't understand that the vast majority of the country expects a refund or they are playing politics with perceptions and the vast number of people who don't understand how taxes and refunds work.Comment
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Where did you find that interesting study that states, “They either don't understand that the vast majority of the country expects a refund.....”Originally posted by kathyc2 View Post
“If filled out per instructions, it would result in small if any refund....”
Think the goal of a Tax Professional is to educate their clients to keep their money throughout the year vs. leaving it interest free and later filing for the overpayment (refund).
That is good financial planning.
Always cite your source for support to defend your opinionComment
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TaxNJ - Let's assume you want to get a refund for $3,000 to pay your property taxes and your homeowners insurance (a reasonable amount around here). How much interest will you earn on that $3,000 if you put it in a regular savings account? About $1 - $6. Many people would use part of it for something throughout the year and they would scramble to obtain the additional funds? Worth it for $1 - $6?Originally posted by TAXNJ View Post
I don't think so!Comment
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When interest rates on savings accounts were very high, I always cautioned against large refunds. But after watching human behavior over the decades and seeing interest rates plunge to almost nothing, I don't bother counseling clients on the pros and cos of large refunds. If they want to lend money to the government "interest free", so be it. There isn't much left on the table anyhow. For most taxpayers, the need for financial accuracy is overridden by the fear of owing the IRS money at year-end. Some people just like to see that big check (or bank deposit) when they file. For those clients, I just tell them its fine to arrange things for the maximum withholding if they want a large refund at year-end. It saves a lot of wasted time and discussion that essentially goes in one ear and out the other.
I have one client who is a fairly savvy investor, has complete control over his withholding, and yet each year he tells me he wants to be sure his tax refund is at least $4,000. I can assure you he always gets that amount plus, especially when the state refund is taken into account. He knows exactly what we are doing to make that happen, and he's always happy."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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It absolutely is not. Good financial planning is helping client reach THEIR goals, not yours. In 2018 preparing 2017 returns, I looked at how new withholding would affect 2018 refunds. When discussing options with clients most of them said they would rather have less in each paycheck to receive a larger refund. Few people are financially disciplined enough to set the extra from paychecks aside. If they want to use withholding for a pseudo saving account, that is their decision, not mine.Originally posted by TAXNJ View PostComment
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You are correct for those clients with that philosophy. But for some clients $1-6 is ok. Depends on type of clients.Originally posted by Dusty2004 View Post
Point is client makes the decision not the Professional.
Always cite your source for support to defend your opinionComment
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TaxNJ you said
"Think the goal of a Tax Professional is to educate their clients to keep their money throughout the year vs. leaving it interest free and later filing for the overpayment (refund).
That is good financial planning."
That does not sound like letting the client make the decision but pushing your opinion on the client.Comment
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Perhaps it would be more clear if the statement had been: " the goal of a Tax Professional is to educate their clients to THE DIFFERENCE between keeping their money throughout the year vs. leaving it interest free and later filing for the overpayment (refund)." I think we can all agree that education should help someone make their own informed decision, not thrust a decision upon them. It's more complicated when some people can manage their cash flows without assistance, but others, for whatever non-financial reasons, are not able to do so, at least not without some heavy outside constraints (like a tax over-payment they can only get back once a year). They may be thoroughly educated but still need to go with the theoretically "worse" decision, our role as tax pros at that point is to back off since we already performed our job with the education step."You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe HowardComment
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If this goes through, I'm going to be advising clients to not fill out new form until their tax appointment where we can discuss what their refund goals are. A lot of taxpayers are not going to be receiving advise like this.
I can see huge problems that new withholding will produce. Say a married couple with 2 kids under 17, each earning 50K. Currently, each claim M0 and have about 4,200 each withheld; 8,400 total. Total tax will be around 8,700 and with the 4,000 CTC will have a refund of around 3,700. Logic would tell them to check MFJ box and per instructions put their they enter the 2 kids on line 3. Their 3,700 refund just went to a balance due of 300. If they miss checking the multiple jobs box and both happen to put 2 kids on line 3 (instructions do not warn against this for MFJ) they are going to have a huge balance due.Comment
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Dusty2004, Incorrect.Originally posted by Dusty2004 View Post
You may have clients that are willing to pay more than required and/or want large refunds and there is nothing wrong with that approach if that works for your clients.
You are reading the reply post wrong. Not pushing an opinion on a client. Again, it is a matter of informing the client so they can make a decision. There are many smart clients that want to save as much as then can. It depends on your client base. Same as tax planning for the client that allows the client to pay as little as legally allowed. That’s the difference.
You have your approach for tax planning and others have theirs.
Always cite your source for support to defend your opinionComment
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