The IRS is recommending that taxpayers do a paycheck checkup to make sure their employers withhold the correct amount of federal taxes. The new tax law changed tax rates and brackets and limited or ended certain deductions, it also increased the standard deduction. In addition, the law removed personal exemptions and increased the child tax credit. The result of all this is that you may need to adjust the amount of tax withheld from your paycheck.
While it’s a good idea for everyone to check their withholding, people in the following groups should especially check to make sure they have the right amount of tax withheld;
- Two-income families
- People with two or more jobs at the same time or who only work part of the year
- People who claim credits such as the Child Tax Credit
- People who claim older dependents, including children over 17
- People who itemized deductions in 2017
- People with high income and more complex tax returns
- People with large tax refunds or large tax bills for 2017
We expect that any client who hasn’t done a paycheck or withholding checkup (or hasn’t had a tax planning/optimization prepared), may have some surprises with balance due returns this year. The IRS has a withholding calculator here. Before you start, have a copy of your current pay stub and your most recent federal tax return to help you answer the questions.
The 2018 W-4 includes worksheet pages that can help you calculate your withholding as well. You can give your employer an updated W-4 at any time.