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A Paycheck Withholding Mistake May Lead to an Unpleasant Surprise Next Tax Filing Season

A Paycheck Withholding Mistake May Lead to an Unpleasant Surprise Next Tax Filing Season

With the 2017 tax deadline officially behind us, it's time to turn our eyes forward to the impact of the recently-passed tax reform law. One of the biggest anticipated complications involves income tax withholding being too low: there are significant fears that taxpayers thrilled to have more money in their paychecks will be in for a rude awakening next year at tax time.

For those who shrug this off and think payroll withholding won't be a problem, we encourage you to browse through the new W-4 instructions: they are complex and confusing, and it's easy for everyday people to end up giving up and trusting that it will all work out in the end.  In the past, people have based their withholding amounts on the previous years' taxes and refunds, but that won't work, and because many people rely on their refunds to pay for vacations, taxes, and other big-ticket payments, insufficient withholding can lead to trouble. Not only will it leave them without sufficient funds, but may even lead to them owing big taxes or having to pay fines and penalties, if their situations are made more complicated by having more than one job or returns that are more challenging for other reasons such as pension income.

As nice as it is to look at a larger paycheck at the end of each pay period, you need to guard against unanticipated trouble in the future, and the best way to do that is to sit down with a tax professional now before it's too late.

Spencer Wilson writes for TaxBuzz, a tax news and advice website. Reach him at [email protected].

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Spencer Wilson

Spencer Wilson

Spencer Wilson, EA is a tax preparer based in Long Beach, CA. Spencer Wilson Financial Management Services has been serving the Greater Los Angeles Area and Orange County since 2004. <br /> We began in the heart of Naples in Long Beach and we continue to work hard offering tax preparation and planning, business accounting and bookkeeping and payroll services . <br /> We have helped many different people and businesses succeed financially and take control over their finances.

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