The Internet Has Made Money Management Easier

About Me

The Internet Has Made Money Management Easier

While my children will never know what life was like before the internet became popular, I do! I remember the days when you couldn't trade stocks online and most people wrote down their money budgeting plans on paper with a pencil. I have always loved the world of finance and money management, so I love learning about all of the new ways technology helps managing money and even investing easier. I can even research a company online to find out if investing in their stock is a wise decision! I know there are many people out there who get overwhelmed when trying to learn about the world of finance, which I enjoy, so I decided to start a blog to share my finance and money management tips. I plan to post about a wide variety of money topics, so come back often to find something that helps you!

It's All About Withholding Now

The new tax season has started, and with it has come an unpleasant surprise for many W-4 employees: owing taxes. For people with one job who take allowances on their W-4 forms to reduce withholding, the refund they usually get has turned into money they owe, in some cases in the four-digits. If this happens, don't rage about your taxes going up just yet. For most people, the problem lies in new withholding amounts.

What Happened

The Tax Cuts and Jobs Act of 2017 modified standard deductions and tax brackets. The tax bracket you're used to being in, and the deductions you're used to taking, have changed substantially. That means your old withholding amounts will change, too. For example, if you're single and have no dependents, and you take just the one deduction for yourself with no other deductions, you might have noticed a slight raise in take-home pay, and may now see your regular refund shrink. That's not because the IRS is taking more. That's because it withheld less as a result of the new tax brackets. Those who are use to taking extra deductions on tax returns may see an even bigger reduction in refunds, or find they owe.

What You Need to Do

If you were one of the people who unexpectedly owed taxes for 2018, you need to redo your W-4 with your employer now. Take a look at your pay stubs from the past year to see how much of a bump you got, and adjust your withholding so that your pay returns to pre-bump levels -- that means that more is withheld, and you'll owe less when you do your 2019 taxes, or you'll get that coveted refund. The IRS has a withholding calculator that you can play around with, too.

What Owing More Than You Can Pay Means

Don't panic if you owe more than you can pay at once. The IRS, despite its reputation, is actually pretty friendly if you truly try to pay. In this case, you'd pay as much as you could with your tax return and set up an installment plan for the rest of the money. Or, you could pay what you can with your return and wait for a bill for the rest; then, if you can pay the rest then, do so, or call the number on the bill to set up a payment plan. These plans can run for a few years, but you can always make larger-than-required payments to get the amount paid off earlier than planned.

You are not alone in finding a surprise on your taxes this year, and you're certainly not alone in owing back taxes on a payment plan. As terrible as it seems if you've never been in this position, this is a situation that you can totally get through with success. Contact a tax professional, such as at Balkcom Pearsall & Parrish CPA's PA, to discuss your withholding to ensure next year's taxes look a lot more like what you've come to expect.