Every year the IRS gets together and starts looking at economic news and forecasts and works with several departments of the government to tweak our tax code. They look at the leading economic indicators, they decide what they need to change, and the collection of tax revenue often changes by year end. Will they do that this year after the most sweeping changes in a very long time? In the past, they would create a lot of temporary tax rules to steer the ship, but it’s a new course and we have only been sailing a short time!
These new rules will be a very big surprise to many Americans, both winners and losers, as next year’s tax collection shakes out, but thebiggest surprise will likely be how many people that usually “get back a thousand or so” instead are going to “owe a thousand or so” because of the greatly ignored withholding changes. One of the many IRS changes in 2018 to very long standing practices was the use of personal exemptions as a tax offset. For many, many years the public at large has thought of that word as almost a form of currency. Personal Exemption$.
For many decades when you started a job , many human resources personnel would give advice like, “Well, if you want more take home pay just change to claiming 4, or claim the max.” Those phrases are still in people’s heads but NO LONGER EXIST! The amount being withheld in 2018 changed and almost every employer is now calculating from a new table of strait math (no exemption talk), and almost everyone on the new table got a little less withheld. To stimulate the economy, the government wanted everyone to have just a little more cash in their pocket, but the bill is going to come due right after the holidays. Many people who pre-spend their tax refund on gifts because they “always get a thousand or so back” aren’t going to get that refund, but instead are going to owe Uncle Sam as well as a credit card company.
What’s the punchline to this happy Blog? Go talk to your HR department and increase your withholding. A lot more until the end of the year. If the increased withholding wasn’t necessary in your case, then your tax refund will be even larger. Likely, it will just barely make your math work, and you’ll only owe a small amount to the IRS in 2019!
Fair warning…this is not a drill!