Is it tax time already? Experts urge people to check withholdings to head off headaches

Published 9:19 pm Thursday, September 26, 2019

By Brian Bakst, Minnesota Public Radio News


In her perfect world, White Bear Lake CPA Elizabeth Bystrom says people would tend to their taxes as they do their tomato plants.

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“Taxes aren’t once a year. They’re a living, breathing thing that are kind of like the plants in their garden. They need watering,” Bystrom said. “Even a small amount of maintenance will go a long ways.”

Many taxpayers gulped when they filed their income taxes this spring after a major tax code rewrite set in. While some with sticker shock made withholding adjustments to avoid a similar problem next year, tax preparers like Bystrom say now’s a good time for a checkup.

“Throughout the year it’s hard for us to often get our clients to change their withholding because it’s out of sight, out of mind. People get their paychecks. They deposit their net payroll check,” Bystrom said. “And they don’t think about it until it comes tax time, and they go, ‘Oh my gosh, I didn’t have enough withholding or I had too much.’”

The IRS is out with new withholding guidance and with a new calculator to help people right-size their paycheck holdbacks.

With three months to go before this tax year ends, experts insist there’s still time to make a fix. The IRS tool helps give people a sense if they’re headed for a tax bill or a refund next spring.

“Avoiding one big surprise one way or another by using this tool now, some tax planning now can definitely save some headaches later,” IRS public affairs officer Raphael Tulino said.

The online withholding estimator is fairly easy to use. Just have recent pay stubs and last year’s tax return handy. While the program asks taxpayers to enter the number of dependents and some tax credit details, no personally identifiable information is required.

Withholding checkups are recommended especially for freelancers, gig economy workers, retirees or people with major life changes — marriage, childbirth, adoption or a home purchase.

Tulino said there was an emphasis on conveying things in plain language.

“Spending the 15 minutes there will really help you,” Tulino said. “And we hope a lot of folks will do that now, especially right around now into October while there is still time to make adjustments as opposed to waiting until the last couple weeks of the year when time has run out.”

The usual disclaimers apply: The projections don’t constitute guarantees and the estimates are only as precise as the information supplied. But with a few extra clicks people can download a fresh W-4 form to submit to their employers if they want to make a course correction.

To his surprise, IT delivery manager Taher Omar said he and his wife faced a steep tax bill earlier this year.

“I felt robbed a bit. Never have I paid into the federal government. I have always received a return from both state and the feds,” Omar said. “And it was a gut blow for sure.”

In 2018, Omar says the Minneapolis couple got $2,000 back in a refund. This year, they owed $3,200 — a $5,000 swing.

Omar said the couple’s income wasn’t all that different from the year before, but not enough was coming out of their paychecks. They have already changed their withholding for 2019.

“I took what I owed in and tried to extrapolate that over two paychecks for 12 months. Yes, there’s been a decrease. Is it hard-hitting? No, but it’s a couple hundred dollars every single month,” Omar said.

Omar said he might have to reassess with his tax preparer after he sees the results early next year.

“I feel the best I can say is I will pay in less,” he said of the 2020 tax filing season.

Bystrom, the White Bear Lake CPA, says people shouldn’t assume next year’s filing situation will mirror the one they had this year.

“I think this next tax season is going to be just as interesting as the last one,” Bystrom said.