Published On: Mon, Jun 10th, 2019

Optima Tax Relief: Nearly 30 Million People Likely Facing Tax Bills

If you found yourself hit with an unexpected IRS bill this past April, you’re not alone. This year, nearly 30 million people found themselves owing the IRS due to changes brought about by the Tax Cuts and Job Act of 2017. The law made significant alterations to the withholding tables employers use to set the amount of federal income taxes pulled from their employees’ paychecks. According to Optima Tax Relief, the highest-ranked tax resolution company on the Inc. 5000, millions of taxpayers were unaware that the law also made it necessary for them to make some adjustments if they wanted to avoid owing the IRS come tax day.

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When the new withholding tables went into effect in February 2018, most people saw a reduction in the amount of taxes being taken out of their paycheck—something most wage earners welcomed. However, there was a downside. The new tables set lot of people’s withholdings below the level needed to satisfy their end-of-year tax liability. Meaning, these people were racking up a tax bill with every paycheck they received throughout most of 2018. And many of them didn’t even know it. As a result, millions of taxpayers were shocked to discover they owed a significant balance to the IRS when they filed this year.

So how can you avoid owing the IRS when April 2020 rolls around? The IRS and financial advisors alike strongly recommend that you conduct a “paycheck checkup.” Ask your employer’s payroll department for a copy of your W-4 and review the number of allowances you’re claiming. (Allowances are those lines on your W-4 that ask you to “Enter ‘1’” if you’re filing as head of household, have dependent children, etc.) If you owed money to the IRS this past tax season, then you probably want to lower the number of allowances you’re claiming.

Experts say it’s especially important for you to do a paycheck checkup if you are in specific groups particularly affected by last year’s withholding changes. These groups include:

Are a two-income family.
Have two or more jobs at the same time or only work part of the year.
Claim credits like the child tax credit.
Have dependents age 17 or older.
Itemized deductions in 2017.
Have high income or a complex tax return.
Have a large tax refund or tax bill for 2018.

If you’re unsure if you are currently withholding enough federal income taxes from your paycheck, the IRS has a withholding calculator on its website that’s free to use. It a simple, online form that helps you determine whether your current withholdings are going to land you in the black or in the red with the IRS come next April.

Author: James Daniel

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