IRS encourages 'Paycheck Checkup' for taxpayers following new tax law
SAVANNAH, GA (WTOC) - The Internal Revenue Service encourages taxpayers to do a "paycheck checkup" to make sure they have the right amount of tax taken out of their paychecks.
The new tax law could affect how much someone should have their employer withhold from their paycheck. Taxpayers could fall into a bind of having too little or too much tax withheld from their paycheck. Some taxpayers might prefer to have less tax withheld upfront and receive more money in their paycheck. However, having too little tax withheld could mean an unexpected tax bill next tax season.
"It took 32 years of code and overhauled it, so we need to change the way we fill out a W-4 or run our payroll calculators, and withhold to match what changed," said James Rahal, CEO of Innovative Tax & Accounting Solutions.
As an accountant, James Rahal deals with the question,"what should I withhold?" every day.
"It depends. Everything depends," said Rahal. "How much of a refund you want. Do you want that for-savings. Do you want to break even?"
To help with this, the IRS has provided a Withholding Calculator on IRS.gov. Using a pay stub and a 2017 tax return, the Withholding Calculator compares a taxpayer's 2018 income tax to the taxpayer's current tax withholding and can help them decide if they need to change their withholding with their employer.
Taxpayers that need to adjust their withholding will need to submit a new Form W-4 to their employer. The IRS recommends this be done as soon as possible. If you wait until later in the year, you'll have fewer pay periods to make the tax changes.
It's important to know the calculator doesn't ask for any personal information like your name, social security number, or address. It also does not save any of your information.
If your personal circumstances change throughout the year, such as having a baby or getting married, the IRS encourages employees to revisit their withholding status.
This is recommended for all employees, but here are the groups most affected:
- Two-income families
- People working two or more jobs or who only work for part of the year
- People with children who claim credits such as the Child Tax Credit
- People with older dependents, including children age 17 or older
- People who itemized deductions in 2017
- People with high incomes and more complex tax returns
- People with large tax refunds or large tax bills for 2017
The IRS is also launching a series of Tax Reform Tax Tips. These tips will begin in April and continue through 2018. They can help taxpayers learn about major tax reform topics in understandable terms. The series will highlight other law changes in the weeks and months ahead, and taxpayers can subscribe on IRS.gov.
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