The Government Accountability Office estimates that millions of taxpayers could have under withheld their taxes after passage of the Tax Cuts and Jobs Act. The government shutdown has also left the IRS understaffed.

Does this all mean wealthy clients are at risk for large, surprise tax bills?

Not necessarily, tax advisors said.

"Most [of my high-net-worth clients] have sufficient withholding to not owe much tax, although some have a much smaller refund in 2018,” said CPA Brian Stoner in Burbank, Calif., who added that about 10 percent of his clients have “had to increase withholding in the last month of 2018 or make a January 15 estimate to roughly have their tax paid in.

“Most high-net-worth clients were concerned based on the stories they’d read or programs they’d watched,” Stoner said. “Their other problem is that they have other sources of income, so we had to plan using estimated tax payments as well as withholding.”

“Most [HNW clients] don’t think about it. They receive their checks electronically as a deposit and don’t look at their stubs,” added John Lieberman, a CPA at Perelson Weiner in New York.

Many also did tax projections at year’s end, ostensibly to avoid a surprise bill. “A projection is a key piece of year-end planning,” said Kathleen Keylor, a CPA and director of tax services at MAI Capital Management in Cleveland. “Also, for many [wealthy] taxpayers, W-2 income, which is the income typically under withheld, is generally not a payment method they rely on. Most of my clients make the bulk of their income from a sole proprietorship, business or various investments, so we utilize estimated payments. For these clients, we’ve been projecting income throughout the year and have adjusted payments.”

Naomi Ganoe, a CPA and managing director and private client service practice leader at CBIZ MHM in Akron, Ohio, added, “This would allow for changes to clients’ W4 and the withholding or to set up and pay tax estimates ... as necessary. It would also allow the client the opportunity to reduce their tax liability with charitable planning.”

“Especially for business owners, the amount of payroll is a significant component in calculating the new Sec. 199A qualified business income deduction,” said Susan Carlisle, a CPA at Carlisle Dorafshani Wohl and Associates in Los Angeles. “Payroll tax withholding and deposits must be synchronized as part of the plan. Relying on government specified withholding tables, especially when there are other sources of income to consider, isn’t sufficient for proper tax projection.”

The IRS is generally waiving the penalty for any taxpayer who paid at least 85 percent of tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination.

New York has also decoupled calculating taxable income from the federal guidelines. “With certain exceptions, New York State and New York City residents can deduct itemized deductions such as taxes, interest, financial advisory fees and so on when they file,” Lieberman said.

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