For all of the employers out there, it is always a good idea at the beginning of every year to update your employees’ Form W-4. This form identifies how many allowances the employee claims for federal income tax withholding purposes.
A major life event may require them to withhold more federal income tax than a previous year, and updating their allowances will help ensure they are withholding the proper amount from their paychecks. The new tax reform has also increased the need for updating allowances as tax rates have changed, certain credits have increased, and others have been eliminated entirely.
Here’s a link to the IRS website for a copy of Form W-4: https://www.irs.gov/pub/irs-pdf/fw4.pdf
Encourage your employees to evaluate their personal tax situations. Did they owe the IRS anything on their last few returns? If yes, they should decrease their allowances, therefore withholding MORE income tax per paycheck. On the flip side, have they consistently received large refunds? In this case, they should increase their allowances, therefore withholding LESS income tax per paycheck. Getting a refund check seems great... until you realize you've practically been giving the IRS an interest-free loan all year!!
The objective is to withhold the proper amount of income tax to where an individual doesn’t owe or receive anything once their tax return is filed. If you or your employees have any questions about income tax withholdings or payroll, you know who to call!
Here's to making 2018 your most profitable year yet!