2 Reasons Why You Should Use the New Tax Withholding Tool

March 30, 2018

When April rolls around, millions of Americans scramble to their tax advisors in an effort to avoid owing additional money to federal and state governments. One way to make sure you’ve paid appropriate taxes throughout the course of the year is to adjust the amount withheld from each paycheck by your employer. With recent policy changes, you might not know how much to set aside for the government’s cut, but the IRS has you covered with a new online calculator. Here’s why you should familiarize yourself with this new withholding tool.

Avoid Underpayment Penalties

The government needs financial resources to carry out its work, which is why there are substantial penalties for those who don’t contribute their fair share. With the passage of the Tax Cuts and Jobs Act, guidelines for personal deductions have changed, which means you have fewer opportunities to reduce your overall liability. The new IRS withholding tool has the latest information included so you can make an informed decision on how much to set aside out of every paycheck. It’s better to pay too much and get a refund than to get hit with a penalty for underpayment.

Account for Non-Wage Income

In today’s “gig economy,” more people than ever are getting income from non-wage sources, but older withholding calculators didn’t take this into account. To avoid an unnecessary headache, the new calculator allows you to input money made from nontraditional means:

Self-employment
Rental property
Gambling income

By taking these funds into account, you’ll prevent any surprises when you head to your Los Angeles tax preparation services.

Get Professional Help

If you’re worried about withholding enough money this year, let the professionals at Wallace & Associates take a look at your finances and recommend a strategy. With more than 50 years of combined experience as Encino tax consultants, we’ve dealt with policy changes before, and we can be your guide through this confusing process. To schedule an appointment with one of our CPAs, contact us online or give us a call at 818-995-2928 today.