Withholding enough from your paycheck? Better check this year
Accountants in New Jersey say people should be updating their paycheck withholdings so that they don’t wind up getting surprised by Uncle Sam next spring.
It seems a lot of people haven’t gotten the message yet.
Ralph Albert Thomas, the executive director of the New Jersey Society of Certified Public Accountants, said after the federal tax law changes were enacted last year, some companies adjusted the take-home pay of their employees, giving them a little bit more in their paychecks without fully understanding the new tax law implications. The result is some workers aren’t having enough withheld from those paychecks.
In August, a NJCPA survey found about half of all CPA respondents reported less than half of their clients had reviewed their withholdings.
Thomas said the ongoing concern is a lot of New Jersey residents, when they file their taxes next year, will either “get a refund back that is not as much as they’d gotten in the past, or the flip side of that is some may go from getting a refund to owing and that’s going to really be a shock to them.”
He said a sizable number of people are simply ignoring the situation, figuring they’ll check this out at some point later on. But they’re going to run out of time “because it would have to be done before the end of the calendar year and we’re already in September.”
So why aren’t people paying attention to this?
“When it comes to taxes, and paying taxes or filing taxes, it’s like pulling teeth," he said. "Clients wait till the last minute to get stuff in and then there’s not a lot of wiggle room.”
An accountant can run a projection to determine whether you need to make changes.
You can also use the IRS website's withholding calculator. You'll need the information from your paycheck stub.
Several individual CPAs and financial planning groups have been voicing concern about this issue for months.
Earlier this year, the federal Government Accountability Office issued a report warning that a higher number of workers are not having a sufficient amount of money withheld from their paychecks because of uncertainty over the new tax laws.