Normally, you have to pay at least 90 percent of your tax liability in order to avoid the penalty.
If you owe this season, consider it a lesson learned and do what you can to head off the same troubles in 2019.
It’s generally a good practice to review your withholding, especially if you’ve been through major life changes, including getting married or having children.
Some taxpayers should pay even closer attention to their W-4s:
• W-2 employees with side gigs: Got a side job in addition to your 9-to-5? Odds are that you aren’t withholding enough in taxes to cover both streams of income.
“If you’re not making estimated tax payments for your side job, then there’s a good chance you’ll owe taxes,” said Rigney.
• Itemizers: Under the old tax law, people who itemized their tax returns may have withheld less tax from their pay.
However, fewer people are expected to itemize under the new tax law, so they should review their W-4s.
That’s because the standard deduction has been nearly doubled to $12,000 for singles and $24,000 for married couples who file jointly (2018).
• Families with dependents: Previously, it may have made sense for families to have less tax withheld from their pay if they had dependents.
However, the new tax law has done away with personal and dependent exemptions. It also broadened the applicability of the child tax credit to include higher-income households.
If you haven’t already made these updates to your withholding and you owed for 2018, be sure to review your W-4.
• Retirees: You may have stopped punching in at work, but you still need to reevaluate your withholding. Use Form W-4V to withhold a flat rate from your Social Security check or Form W-4P to withhold from your pension.
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