Case Study 13: Single Taxpayer Withholding One Allowance

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Introduction
The purpose of this next series of articles is to explore the changes in the withholding rates with the new 2018 tax bill as well as the incremental benefit of taking an additional withholding allowance. In this example, a single individual earning $50,000 a year paid on a biweekly basis electing one withholding allowance.

Calculation
Applicable Withholding

Withholding Calculation

Income Tax Calculation

Discussion
As shown above, the withholding rates for 2018 result in a smaller amount being withheld from each paycheck. The cumulative difference in the amount withholding taken out of each paycheck results in a decrease in the tax refund at the end of the year. The taxpayer will receive an increase on each individual paycheck of $55 ($1,440 annually), but will end up receiving $171 less when they file their tax return.

Disclaimer
Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.