Late last year a tax overhaul was signed into law. This law gives a new direction to the IRS as to how individuals and businesses should be taxed and at what rates. This has left people wondering about their tax liabilities for 2018.
One of the biggest changes brought about by the 2018 tax reform is the removal of personal exemptions. In the past, for each person “claimed” on the tax return (taxpayer, spouse, children, other dependents), a deduction was provided. In 2017, personal exemptions were allowed at $4,050 per person. This means for every exemption claimed, $4,050 of income was not subject to taxes.
Some of the other changes in the tax code are quite significant and will cause some to get a larger refund, but others, depending on their financial situation (especially those who have taken advantage of personal exemptions in previous years), may need to withhold more from their paychecks.
Even though the tax code has not yet been officially updated, the IRS recently released a withholding calculator that allows individuals to check if they are having enough withheld from their paychecks once the changes become permanent law.
It is imperative that everyone think through their tax situation with help of this revised calculator. You can find the ?IRS Withholding Calculator? here.
Written by Lesley Perez-Muntslag, Honest Buck Client Service Lead