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Help Your Client Bring Their W4 Withholding Into Balance

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The first question you get from clients when you broach the topic of bringing withholding into balance on their form W-4 is going to be, “What’s a W-4?”

Will you be ready with an answer? Be aware of recent changes with the IRS before you say a word.

One thing you can do to help your clients bring withholding into balance is to inform them that their withholding may be out of balance due to tax code changes precipitated by the Tax Cuts and Jobs Act.

Educating your clients is paramount, especially this year. Remind clients who received a premium tax credit to notify the insurance exchange of any income changes so they can avoid having to pay back some or all of the credits. Who wants to deal with surprises at tax time?

Your clients need to know that every time they earn income they will probably owe taxes. There are a few exceptions. For instance, nontaxable income won’t be taxed, and it won’t matter if you enter it on your tax return.


Nontaxable Income

The IRS deems certain items nontaxable. Be sure your clients understand what they are. Assumptions can get them into big trouble with the IRS.


Taxable Income

Your clients must be clear that when they are employed and earn income, their form W-4 will determine how much they pay in taxes.

As you know this system works well for “standard” taxpayers who file single, have one job, and claim standard deductions. But if certain clients don’t fit into this category, it’s possible they could have too much (or too little) tax withheld.

Be prepared. Your clients need to be informed of certain life events that result in more taxable income while others entitle them to credits and deductions that lower taxes. Here are some of the most common:

  • Getting a second job or changing jobs
  • Partial unemployment within the year
  • Getting married or divorced
  • Having or adopting a baby


Update Form W-4 Regularly

Bottom line: If you want to avoid complicated issues with frustrated clients next tax season, be sure all your clients know about the changes in form W-4.



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