As you may know, major changes to federal tax law took place last year! Based on the Tax Cuts and Jobs Act, updates were automatically applied to your payroll system’s wage withholding calculations. To help taxpayers ensure that their 2018 withholding amounts are accurate, the Department of the Treasury has launched a new tax withholding calculator service available on the IRS website.
If you have a single income source and a standard (or relatively straightforward) deduction scenario, your new withholding amounts are probably okay, nevertheless, it will be to your advantage to take a few minutes and ensure the government is not withholding too little, or too much, of your 2018 wages.
The more complex your tax returns, the more likely that your new withholding amount needs to be verified. If any of the following conditions apply to you or your household, then you are STRONGLY urged to visit the new IRS withholding calculator, and, if indicated, change your withholding amount by filling out a new (2018 revised) W-4 form:
- You are a two-income family
- You have two or more jobs at the same time or only work part of the year
- You claim credits like the child tax credit
- You have dependents age 17 or older
- You itemized deductions in 2017
- You have high income or a complex tax return
- You have a large tax refund or tax bill for 2017
To use the IRS calculator, you will need your pay stub and 2017 tax return info. Plan to spend about 5-10 minutes, and be assured that you will not be asked to submit any personally-identifiable information, nor is any data you enter into the calculator saved or recorded.
While it goes without saying that nobody wants the pain of having to write a big check next April, keep in mind that excess withholding is not a financially savvy move either. The IRS will not pay you any interest for letting them hold your extra money all year, nor will it be available to you for emergency expenses or to pay down credit card balances.
Even in the absence of any legislative shake up, income withholding should be reviewed periodically to reflect changes in marital status, household size, income level, deduction qualifications, and other circumstances. Don’t forget, you are permitted to revise your W-4 at any time during the year, and as frequently as you need to, so take this opportunity to give your withholding a check-up!