“Withholding issues can be complicated, and the calculator is designed to help employees make changes based on their personal financial situation,” Acting IRS Commissioner David Kautter said.
“Taking a few minutes can help taxpayers ensure they don’t have too little – or too much – withheld from their paycheck.”
The Tax Cuts and Jobs Act increased the standard deduction, removed personal exemptions, increased the child tax credit, limited or discontinued certain deductions and changed the tax rates and brackets.
The Withholding Calculator gives employees the information needed to fill out a new Employee’s Withholding Allowance Certificate. Employees will submit this completed Form W-4 to their employer.
The withholding changes do not affect 2017 tax returns due in April. However, having a completed 2017 tax return can help taxpayers work with the Withholding Calculator to determine their proper 2018 withholding and avoid issues when they file next year.
Taxpayers Should Have ‘Paycheck Checkup’
The IRS encourages employees to use the Withholding Calculator to perform a quick “paycheck checkup.”
An employee checking his or her withholding can help protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time in 2019. It can also prevent employees from having too much tax withheld. With the average refund topping $2,800, some taxpayers might prefer to have less tax withheld up front and receive more in their paychecks. The Withholding Calculator can be used by taxpayers who want to update their withholding in response to the new law or who start a new job or have other changes in their personal circumstances in 2018.
People with more complicated financial situations might need to revise their W-4. With the new tax law changes, it’s especially important for these people to use the Withholding Calculator on IRS.gov to make sure they have the right amount of withholding.
Among the groups who should check their withholding:
- Two-income families
- People with two or more jobs at the same time or who only work for part of the year
- People with children who claim credits such as the Child Tax Credit
- People who itemized deductions in 2017
- People with high incomes and more complex tax returns
Taxpayers with more complex situations might need to use Publication 505, Tax Withholding and Estimated Tax, expected to be available on IRS.gov in early spring, instead of the Withholding Calculator. This includes those who owe self-employment tax, the alternative minimum tax, or tax on unearned income from dependents, and people who have capital gains and dividends.
Tips for Using the Withholding Calculator
The Withholding Calculator asks taxpayers to estimate their 2018 income and other items that affect their taxes.
Take a few minutes and plan ahead with these tips on how to make your time with the Withholding Calculator as easy as possible:
- Gather your most recent pay stub. Check to make sure it reflects the amount of Federal income tax that you have had withheld so far in 2018.
- Have a completed copy of your 2017 (or possibly 2016) tax return handy. Information on that return can help you estimate income and other items for 2018. Note that the new tax law made significant changes to itemized deductions.
- The Withholding Calculator results are only as accurate as the information entered. If your circumstances change during the year, come back to the calculator to make sure your withholding is still correct.
- Use the results from the Withholding Calculator to determine if you should complete a new Form W-4 and, if so, what information to put on a new Form W-4.
- As a general rule, the fewer withholding allowances you enter on the Form W-4 the higher your tax withholding will be. Entering “0” or “1” on line 5 of the W-4 means more tax will be withheld. Entering a bigger number means less tax withholding, resulting in a smaller tax refund or potentially a tax bill or penalty.
- If you complete a new Form W-4, submit it to your employer as soon as possible. With withholding occurring throughout the year, it’s better to take this step early.
Security Reminder:The Withholding Calculator does not request personally identifiable information such as name, Social Security number, address or bank account numbers.
The IRS does not save or record the information entered on the calculator, not does it send emails related to the calculator or the information entered. Always be alert for cybercriminals impersonating the IRS, or any tax scams via phone or email.
For Further Information: Consult the Withholding Calculator Frequently Asked Questions.