While there are still a few pay periods left before the end of the year, do yourself a favor and look at your last paycheck to see how much income tax has been withheld so far this year. If you've had too much or too little withheld, there's still time to submit a new 2019 Form W-4 to have your withholding for the rest of the year (and beyond) adjusted. But, since you probably only have a couple of pay periods left this year, you need to act as soon as possible to have an impact on your overall 2019 withholding.
If your employer hasn't withheld at least (1) 90% of the income tax you expect to owe for 2019, or (2) 100% of the tax you paid for 2018 (110% if your 2018 adjusted gross income was more than $150,000), you could be hit with an underpayment penalty when you file your federal tax return in April 2020. If that's the case, you can file a new W-4 form to increase your withholding by claiming fewer withholding allowances (but not below zero). Since there are only a few pay periods between now and December 31, if reducing the number of allowances won't make enough of a difference in your withholding to avoid the penalty, you can specify an amount you'd like to have withheld on line 6 on the W-4 form instead.
On the other hand, if you think too much tax has been withheld this year, you can give your employer a new W-4 claiming more allowances. Less tax will be withheld, and you'll get a bigger paycheck.
SEE ALSO: State-by-State Guide to Taxes
To help you determine if and/or how much to adjust your 2019 withholding, use the IRS's Tax Withholding Estimator as soon as you can. Have your most recent pay stub and a copy of your 2018 tax return handy to help estimate your 2019 income. Again, you must act quickly, since we're almost to the end of the year!
Note: The IRS is changing Form W-4 starting in 2020. As a result, withholding allowances will no longer be used to calculate income tax withholding for employees who submit a new W-4 after 2019. However, if you don't submit a new W-4 after 2019, your employer will continue to use the information from your pre-2020 W-4 to calculate your withholding.
SEE ALSO: 10 Tax Breaks for the Middle Class
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