Here's a cool picture to look at while you ponder whether you want to keep reading or not. No, that is not me. But I wish it were!
A few weeks ago, the IRS, after going through gyrations for months, FINALLY (has it been TWO YEARS since the new tax law passed???) released their brand spanking new Form W-4. That is the one you fill out when you get a new job. Or want to change how much is withheld from your paycheck. If you have seen it (I'll include a link to it below), it probably boggled your mind. It did mine! And I'm a TAX GUY for Pete's sake! Someone tell me where the "allowances" went? We all used to take great pride in our allowances. "I'm a Married 5!" "Well, I'm a Single 0!" "Wow! You're COOL!!"
The allowances are NO MORE. Gone forever. Which makes sense since we no longer have exemptions.
While the new form at first looks kind of mind-blowing, it really deep down is kind of simple. The first hint of payroll withholding came about in 1943 and I'm pretty sure this is the first time the Form has changed since then. It was time. For most folks, they will simply put a check by their filing status, sign and done. THAT IS ALL. No allowances.
For others whose spouse has a job, there is a bit more leg work. You get to check a box (always fun, I actually went to school for that), look up your income on a tax table (even more fun......and advanced schooling for that) and enter the magic number in a box. Not any old box, but box 4(c). There are also boxes to account for the Child Tax Credits and Deductions.
Bottom line: this Form may work just fine. Especially since the old Form and its tables were based on the culture in 1943, assuming that we all lived in single-earner homes. That culture changed decades ago, thus wreaking havoc with payroll withholding.
Will it work fine though? It all depends on the funky new IRS tables your employer has that the withholding is being based on. Are they correct? Do you trust the IRS to get it right? Hmmmmmmmmmmm............... I'm kind of leery myself. My advice? Fill out the new Form to best of your following-directions ability. Wait a couple of months and see what your withholding does. If it looks like it is off, call your trusty CPA for help. <you will automatically hear the sound of a throat being cleared right here.>
I'm still kind of baffled by filing a W-4 with NO NUMBERS on it. Those allowances really meant something..........
Here's that special link to Form W-4 (and of course, real clear instructions) on the IRS Website. See you next time! And enjoy.