Show us the money. This is when your tax-cut pay increase must begin
"Set up automatic transfers for the money so it never gets into your hands and your good decisions last all year long," says the professor of financial planning, housing and consumer economics at the
That's right. Palmer suggests putting the new-found cash to better use and not spending it on frivolous items and activities. Instead, he says consumers should pay down their credit cards and make the payment automatic -- or mindless. Employees also should consider using a portion of it to increase their 401(k) savings plans and employer matches, or perhaps pay into a Roth IRA that subtracts the tax bite up front since the money contributed is from already-taxed earnings.
No matter your decision, workers in the
Palmer noted that take-home pay is expected to increase anywhere from
"The
One tax schedule example: A single filer earning between
There are even some paycheck calculators that consumers can use online, although it is best that employees consult their company human resources manager or director if they have any concerns about their pay.
The bottom line, there are a variety of questions many people might have about the upcoming changes and pay increases. Here, directly from the federal agency mandated with carrying out the tax reform initiative -- that being the
Q: Why are these changes being made?
A: The new withholding tables are needed to reflect the changes in tax rates and tax brackets, increased standard deduction and repeal of personal exemptions that were included in the tax reform law signed in
Q: How soon will people see the changes in their paychecks?
A: Employees should begin to see withholding changes in their checks in February. The exact timing depends on when their employer can make the change and how often they are paid. It typically takes payroll providers and employers about a month to update withholding changes on their systems.
Q: Will employees need to take any action to get the new withholding rates?
A: No. Payroll changes required each year are made by employers and their payroll providers, so employees are not required to take any extra steps. However, employees should review their withholding to make sure that it is accurate.
Q: What is a withholding table?
A: A withholding table shows payroll service providers and employers how much tax to withhold from employee paychecks, given each employee's wages, marital status, and the number of withholding allowances they claim.
Q: What is a Form W-4?
A: This is an
Q: Will people need to fill out a new W-4 form right now?
A: No, the new withholding tables are designed to minimize taxpayer burden as much as possible and will work with the Forms W-4 that workers have already filed with their employers to claim withholding allowances. The
Q: Is the
A: Yes.
Q: Should people check their withholding after the new 2018 Form W-4 and the withholding calculator are available?
A: Yes. It's always a good idea for people to check their withholding status. The
Q: Are some taxpayers at risk of being under-withheld on their taxes with the changes to the withholding tables?
A: Some people have more complicated tax situations and face the possibility of being under-withheld. For example, people who itemize their deductions, couples with multiple jobs or individuals with more than one job a year will be encouraged to review their tax situations. The
Q: Are many people under-withheld on their taxes?
A: Most people are over-withheld on their taxes, meaning that more taxes are held out of their paychecks than what they owe.
Q: Will the
A: In 2019, the
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