The IRS is urging taxpayers to review their 2019 tax withholding using the IRS Withholding Calculator and make any changes with their employer as soon as possible. 

Checking withholding is a good idea every year, and it’s even more important this year as more impacts of the Tax Cuts and Jobs Act of December 2017 become known. In addition to taxpayers who adjusted their withholding in 2018, others who should do a Paycheck Checkup include those who: 

  • Owed tax when they filed their tax return this year 
  • Had a refund larger or smaller than expected 
  • Had life changes such as marriage, childbirth, adoption, or buying a home  
  • Had changes to their income 

Most people are affected by changes made in TCJA tax reform legislation. These changes included lowered tax rates, increased standard deductions, suspension of personal exemptions, the increased Child Tax Credit, and limited or discontinued deductions. Just because a change did not apply to a taxpayer last year doesn’t mean it will not apply this year. Changes might include the need to make an adjustment to withholding. This includes taxpayers who: 

  • Have children and claim credits, such as the Child Tax Credit 
  • Have older dependents, including children age 17 or older 
  • Itemized deductions in the past 
  • Are a two-income family 
  • Have two or more jobs at the same time 
  • Only work part of the year 
  • Have high income or a complex tax return 

Conducting a Paycheck Checkup is especially helpful for those who adjusted their withholding during the middle or later parts of 2018. mid-year withholding change that only affects part of 2018 might have an unintended impact if it remains in effect for all of 2019. If withholding is too high or too low in 2019, the result could be a change to the taxpayer’s refund or tax bill the following year. Adjusting withholding after doing a Paycheck Checkup can help taxpayers avoid this outcome. 

Those with more complex situations may need to use Publication 505Tax Withholding and Estimated Tax, instead of the Withholding Calculator. This includes employees who owe self-employment tax, the alternative minimum tax or tax on unearned income from dependents. It can also help those who receive non-wage income, such as dividends, capital gains, rents and royalties. The publication includes worksheets and examples to guide taxpayers through these special situations. 

Tax Planning Helps Avoid Surprises 

Using the IRS Withholding Calculator for a Paycheck Checkup and tax planning now can help ease possible tax consequences of changes in income or family situation during the year.  

It can help protect a taxpayer against having too little tax withheld and facing an unexpected tax bill or even a penalty at tax time next year. This useful tool can also help a taxpayer who prefers to get a refund estimate how much more income to ask their employer to withhold from their paychecks so that they will instead get a refund when they file their tax return.  

When using the calculator, it’s helpful to have a completed 2018 tax return and a recent paystub available for all jobs held by both spouses if married and filing jointly. For more details see Tax Withholding: How to Get it Right.  

How to Change Withholding  

Employees can use the results from the Withholding Calculator to see if they need to complete a new Form W-4, Employee’s Withholding Allowance Certificate, and submit it to their employer (not to the IRS). In some instances, the calculator may recommend that the employee also have an additional flat-dollar amount withheld each pay period. 

Those who don’t pay taxes through withholding, or pay too little tax that way, may still use the Withholding Calculator to determine if they need to pay estimated tax to the IRS quarterly during the year. Those who are self-employed generally pay tax this way. See Form 1040-ES, Estimated Taxes for Individuals, and FS-2019-6: Basics of estimated taxes for individuals, for details.       

The IRS urges everyone to do a Paycheck Checkup as early in the year as possible. This way if a tax withholding adjustment is needed, the amount of tax to be withheld can be spread across more paychecks remaining in the year. Waiting means the remaining tax owed will need to be withheld from fewer paychecks so more will have to be taken from each one.