The IRS is changing paycheck withholding, and it'll be a doozy

[Yo_Mama_Been_Loggin]

You finally finished your taxes and are learning – for better or worse – the ins and outs of the new law.

But wait, the law isn’t done with you. There’s another complication coming out later this year: The Internal Revenue Service is changing how you adjust your paycheck withholdings, and early indicators show it won’t be easy.

The agency plans to release a new W-4 form that better incorporates the changes ushered in by the new tax law so that the amount held back for taxes in each of your paychecks is more accurate.

The agency’s goal: A taxpayer shouldn’t owe or be owed come tax time.

But the changes won’t be simple, says Pete Isberg, head of government affairs at ADP, the payroll and human resources company.

Filling out the new form will be a lot like doing your taxes again.

“It’ll be a much bigger pain,” he says. “The accuracy will be 100 percent, but the ease-of-use will be zero.”

https://www.msn.com/en-us/money/taxes/the-irs-is-changing-paycheck-withholding-and-itll-be-a-doozy/ar-BBVL5zL?li=BBnb7Kz

It used to be one of the easiest things to fill out. Now these idiots want to fuck it up.

[Ms. Toad]

1. And, to be accurate for this year,

it will need to be redone again next year, since 25% of the year is already gone, so any withholding adjustments will have to play catch up for the remaining months of the year (and would withhold too much for the 2020, when they are spread over a full year).

[at140]

3. Withhold as small as possible!

That is what I do for my IRA required minimum distributions. So I will be writing a check to IRS on April 15th for a few thousand $$, which I consider an interest free loan to me, on which I collected some free interest.

[mr_lebowski]

4. If you have the financial discipline and/or enough cushion to make this do-able ...

It is clearly the most financially beneficial route. After all, why pay in advance when you don't have to? Esp. when AFAIK you don't collect any interest for doing so.

A lot of people don't want to assume that risk, however, for various reasons.

[at140]

9. Correct you are, and some people use it as forced savings

to get a refund, because they do not have the discipline to save regularly.

[jmowreader]

10. Some of us have the discipline to save regularly, and still over-withhold substantial sums

The interest rate my bank offers on passbook savings is one-one hundredth of a percent. I like the bank, so I'm not moving the money. I will NOT join a credit union. Since I'm making essentially No Money on my savings, why not let the government borrow it to build roads for a few months?

[at140]

12. Have you looked into money market funds at brokers?

Those are not insured like savings account, but because of large diversification, money market have an excellent record for safety of principle. And they pay much more interest than a CD at bank or a savings account. Stability is also very good because the value remains at $1/unit. Those are free to buy and free to sell and there are not many restrictions on size or frequency of transactions. But you need $2500 minimum usually to open an account.

You can also consider things like GNMA funds, they pay more than MM funds, but are susceptible to interest rate changes up or down.

[jmowreader]

13. I have, but I don't think I want to

[at140]

14. MM beats every bank rate interest LOL

[Ms. Toad]

6. If you really owe a few thousand on April 15,

it is not necessarily interest free.

But I agree with the general principle.

[at140]

8. Yes it is 100% interest free so long as

you had enough withheld so that you do not incur an underpayment penalty.
Use the computer software from HRBlock or TurboTax or Taxact and you can project what minimum amount must be withheld without having to pay penalty for underpayment of tax withheld.

I have been doing this for decades without a single penny of interest.

[Lucky Luciano]

11. Indeed, but the caveats for underpaying should be clearly noted! Nt

[Ms. Toad]

16. That was my point.

Unless you owe very substantial taxes, the amount you can get away with owing year after year at tax time is more likely in the hundreds, than thousands.

Underpayment penalties kick in at $1,000, unless you have paid 90% of your current year's taxes, or 100% or your prior year's taxes.

In real numbers, that means you have to have a tax bill of at least $10,000 (assuming steady taxes) before you can underpay $1,000 (based on this year's taxes); to get to underpaying several thousand dollars without penalty, your tax bill would need to be several x $10,000.

In the alternative, based on paying 100% of the prior year's taxes, you had an increased tax bill of several thousand dollars every year for deades.

[at140]

17. I guess this year I was covered by last years tax paid

because the amount I owe is much more than $1000. Yet HRBlock does not show any penalty due.
I had withdrawn in excess over the RMD from my IRA in 2018, which inflated my taxes in 2018 over those in 2017. In 2017 it was just the RMD.

[scrutineer]

2. The accuracy will NOT be 100 percent

People don't have accurate information handy, and unexpected events can change everything.

At best this is of marginal benefit to a few.

[Amishman]

15. Yup, mine will never be accurate

As my income swings significantly based on my current contract, bonuses, and any side consulting work that comes my way. My income can vary as much as 50% year over year

[Firestorm49]

5. "Why don't you knock it off with those negative waves." Sgt. Oddball - Kelly's Heroes.

[DFW]

7. Like Bill Clinton said of the Republican way of doing things:

"If it ain't broke, break it!"