I marked a 0 on my original W4 plus requested $10 from every paycheck be added to my tax withheld when I first became their employee in February 2017. They followed this. In 2018, I was not asked to fill out a new W4. I was not notified of any changes. And the IRS never notified me of under average amount being withheld, which is what I read is supposed to happen sometime during the first few months.
Yeah, it's my fault for not reading the online paystubs my employer has switched across 3 different websites. And I still owe the money. But my employer is supposed to use my most current W4 or use the standard deduction, which would be the highest. How the hell did they even figure up $3 per paycheck to take out last year? And why didn't the IRS notify me I was underpaying since that's their whole deal every quarter? Wouldn't they also have notified my employer?
Second, the IRS does not monitor individual taxpayers' withholding throughout the year. The quarterly reports, Form 941, only reconcile employers' tax deposits to the aggregate amounts withheld from their employees and the employers' share of FICA taxes.
Many taxpayers are finding that their refunds are smaller than expected or that they owe taxes this year.
In 2018, the withholding tables used by employers were adjusted to put more money into wage earners' paychecks. This was done without fully taking into account the impact of many tax law changes that were also taking effect in 2018. The IRS position is that employees were expected to adjust their Forms W-4 to deal with the impact of the new withholding tables, but that message does not appear to have reached vast numbers of taxpayers. The consequence is that many taxpayers are seriously under-withheld.
The impact of the changes being seen in 2018 federal income taxes, as a result of the Tax Cuts and Jobs Act of 2017, is likely going to vary depending on each individual taxpayer's circumstance and their prior reliance of familiar aspects of the tax code that have seen significant change.
The increase in the Standard Deduction and the elimination of the Personal Exemptions are likely to cause the greatest changes for most taxpayers.
For 2018, the increased Standard Deduction amounts for all filers are:
- Single or Married filing separately—$12,000.
- Married filing jointly or Qualifying widow(er)—$24,000.
- Head of household—$18,000.
Please be aware that this increase in the Standard Deduction is accompanied by the suspension, for tax years from 2018 to 2025, of the Personal Exemption, which in 2017 was $4,050 for the taxpayer, spouse, and each dependent.
For taxpayers who have previously itemized their deductions, it is likely that itemizing will be less attractive, due to the following, and other, changes:
- State, local, property, and sales tax (SALT) deduction – capped at $10,000 ($5,000 if married filing separately).
- Mortgage interest – capped at interest on $750,000 of mortgage debt.
- Home equity loan or line of credit -- interest is deductible only if loan was used to buy, build, or substantially improve your home and your total mortgage debt doesn’t exceed $750,000.
- Miscellaneous deductions subject to the 2% limit – suspended.
- Personal casualty and theft losses – suspended (with exceptions).