One step you can take in 2020 to head off a tax surprise

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Make 2020 the year you nail your taxes: The IRS has released the final version of its new tax withholding form.

The new Form W-4 goes into effect for 2020. Employees use it to tailor the amount of income tax that’s withheld from their paychecks.

The document reflects changes from the Tax Cuts and Jobs Act, the overhaul of the tax code that went into effect in 2018.

The tax law nearly doubled the standard deduction, eliminated personal exemptions and curbed certain itemized deductions, including applying a new $10,000 cap on state and local tax deduction.

Back in 2018, the IRS and Treasury updated the withholding tables to account for these changes.

Whether you’re tweaking your W-4 or you’re starting a new job in 2020, you’ll want to dig up last year’s return to make sure you get the numbers just right.

Withhold too much, and you take home less pay but you wind up with a larger refund the following year.

If you withhold too little, you keep more of your paycheck, but you might owe the taxman the following spring.

If you were happy with how your 2018 taxes turned out and you’re on the right track for 2019, you can also opt to leave your withholding ais.

“Most folks aren’t affected by this, but it’s the job changers and people who want to adjust their withholding,” said Pete Isberg, vice president at ADP, a payroll company.

“It might make sense to pull details from last year’s tax return,” he said.

Remember: Changes you make to your withholding in 2020 will be reflected in the tax return you file in April, 2021.

For the most part, it’s too late to make dramatic changes to your withholding for the 2019 tax year…Read more>>

Source:-cnbc