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Extra cash in paycheck-- is this the new tax bill in action?

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  • Extra cash in paycheck-- is this the new tax bill in action?

    I just noticed in the last 3 paychecks we are getting an extra $500/month. I knew we were going to see some tax savings with the new bill but I guess I just thought we'd pay less when we did our taxes next year, not see it in every paycheck, for some reason. Doesnt actually make sense now that I say it out loud. I guess I just wanted to make sure I wasn't missing anything and will not be stuck with an extra large tax bill in 2019 because we weren't taking enough out each pay period this year. Last time I didn't question extra cash, it turned out our mortgage company had dropped our windstorm insurance without telling us so we were paying less into escrow every month and came within 7 days of not having insurance before our house was 40 percent destroyed by a hurricane.

  • #2
    Possibly, but hard to tell without knowing a lot more about your finances. You need to do a tax projection with your current info and check against your withholdings.
    Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      Are you only comparing your savings/checking account direct deposits or are you actually comparing your complete paycheck statement? It would seem like the latter should answer your question as to why your "paycheck" (direct deposit) has changed. Either your total compensation has increased, your FICA has decreased or your other deductions (401k, 403b, HSA, health insurance premiums, etc.) have decreased. It is likely that your FICA will have decreased due to the new tax bill, although I'm not sure the change would have taken effect for the first or second pay period of 2018. At least, I would suggest starting with a side by side comparison of your complete paychecks from before and after you noticed the change.

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      • #4
        I pay my employees twice monthly (using Quickbooks payroll) and the new tax schedule didn't kick in until the Feb 1st paychecks.  There was a noticeable jump in take-home pay at that time.

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        • #5




          Are you only comparing your savings/checking account direct deposits or are you actually comparing your complete paycheck statement? It would seem like the latter should answer your question as to why your “paycheck” (direct deposit) has changed. Either your total compensation has increased, your FICA has decreased or your other deductions (401k, 403b, HSA, health insurance premiums, etc.) have decreased. It is likely that your FICA will have decreased due to the new tax bill, although I’m not sure the change would have taken effect for the first or second pay period of 2018. At least, I would suggest starting with a side by side comparison of your complete paychecks from before and after you noticed the change.
          Click to expand...


          My gross pay is the exact same, my deductions did not change. And strangely FICA is the same. But both federal and state withholdings were lower, accounting for the difference in net pay between this year and last year. And I did not change my allowances (still 0) or single/married status (still single) for w-2 purposes.

           

          Is that how the tax bill was supposed to work?

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          • #6
            have heard many people around water cooler talk about getting pay bump in first february check.

            i just assumed it was because of new tax rates.

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            • #7







              Are you only comparing your savings/checking account direct deposits or are you actually comparing your complete paycheck statement? It would seem like the latter should answer your question as to why your “paycheck” (direct deposit) has changed. Either your total compensation has increased, your FICA has decreased or your other deductions (401k, 403b, HSA, health insurance premiums, etc.) have decreased. It is likely that your FICA will have decreased due to the new tax bill, although I’m not sure the change would have taken effect for the first or second pay period of 2018. At least, I would suggest starting with a side by side comparison of your complete paychecks from before and after you noticed the change.
              Click to expand…


              My gross pay is the exact same, my deductions did not change. And strangely FICA is the same. But both federal and state withholdings were lower, accounting for the difference in net pay between this year and last year. And I did not change my allowances (still 0) or single/married status (still single) for w-2 purposes.

               

              Is that how the tax bill was supposed to work?
              Click to expand...


              Well, I would expect federal withholding to decrease based on the new tax bill, but it is curious that it happened at the very beginning of the year because it seems from what I have heard the changes would not be made within payroll departments until late january or early february. Also, I wouldn't expect the new tax bill to have an effect on state tax withholding. But I'm not an accountant, so perhaps  jfoxcpacfp might be able to answer more elegantly than I.

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              • #8
                Usually the January paycheck declines because you are paying Social Security tax on the first $128,400 of your salary.  I don't know any payroll processors that were ready to go to implement the new tax changes on January 1st.  As others have said, February 1st seems to be the target date.  You may want to double check your withholdings to ensure you are still on track for 2018.

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                • #9
                  Our bookkeeper gave us the option of changing our withholding to reflect the new tax schedule. I kept my Federal withholding at 30%, where it has been for the last few years. My paycheck in February (and onward) will be the same as January.

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                  • #10


                    But I’m not an accountant, so perhaps  jfoxcpacfp might be able to answer more elegantly than I.
                    Click to expand...


                    Elegant, huh? Agree with @cgossage. Are you sure you filled out your W4 exactly the same as the prior year? I would suspect that as the culprit and, if so, it could mean you will under-withhold this year. Might want to check on that, especially if your paycheck goes down even more in February.
                    Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                    • #11




                      Usually the January paycheck declines because you are paying Social Security tax on the first $128,400 of your salary.  I don’t know any payroll processors that were ready to go to implement the new tax changes on January 1st.  As others have said, February 1st seems to be the target date.  You may want to double check your withholdings to ensure you are still on track for 2018.
                      Click to expand...


                      I made less than $128,400 last year so that is not the reason for the change. It seems my Jan 7 paycheck was more than Dec 2017 but less than the Jan 22 and Feb 7 paychecks (which were both for the same amounts, which is normal for me). My husband also works for the same university in IT and his pay followed the same pattern as mine. Maybe our payroll people were just REALLY on the ball??




                       Are you sure you filled out your W4 exactly the same as the prior year? I would suspect that as the culprit and, if so, it could mean you will under-withhold this year. Might want to check on that, especially if your paycheck goes down even more in February.

                      Click to expand...


                      I didn't change the W4 or witholdings, wasn't even given the choice to do so and when I look on my paystub it says single/0 allowances. I can't withold more than that can I?? I'm employed, if that makes a difference.

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                      • #12
                        You can withhold as much as you want. There is a separate line on a W-4 to put in additional withholding. I do this because otherwise my wife and I would owe too much taxes and face penalties. It’s a fairly common scenario for married filing jointly, I suspect.

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                        • #13


                          I didn’t change the W4 or witholdings, wasn’t even given the choice to do so and when I look on my paystub it says single/0 allowances. I can’t withold more than that can I?? I’m employed, if that makes a difference.
                          Click to expand...


                          I'm befuddled over this one. Last stop - check with your payroll dept.
                          Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                          • #14
                            Yeah it is.

                            Wife's check jumped about $600.  Didn't touch the W4 or change anything since last year.  Multiplied it by the remaining checks, and it lines up with what all the tax calculators said we'd be saving under the new law.

                            IRS withholding tables were ready mid-january, but released January 29.  Employers are supposed to put them into effect no later than Feb 15.  You wouldn't have seen anything change on January checks but this one would be the first.

                            I expect my check won't change much since I finally turned my 401k all the way up just a couple weeks ago.

                            edit - just saw you said first three checks.  Yeah something else probably changed in your withholding.  Good news is you should see it get even better mid-feb.   

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                            • #15
                              Crumbs for the little people

                              NP

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