Time for a Paycheck Checkup

Use the IRS Withholding Calculator to Determine the Right Amount of Withholding for You

You may be getting a tax refund early in the current year, but it’s important to start planning for next year. The IRS encourages a “paycheck checkup” following recent changes to the tax law. You can use the IRS Withholding Calculator on IRS.gov.

The calculator can help prevent having too little tax withheld — and an unexpected tax bill next year. With the average refund topping $2,800, the calculator can also help you determine to have less tax withheld up front and receive more in your paychecks now.

Changes to the tax law affect the current year’s return you will file next year. The Tax Cuts and Jobs Act made changes, including increasing the standard deduction, removing personal exemptions, increasing the child tax credit, limiting or discontinuing certain deductions and changing the tax rates and brackets.

To use the IRS Withholding Calculator for your “paycheck checkup”:

  • Gather your most recent pay stub from work. Check to make sure it reflects the amount of federal income tax that you have had withheld so far in this year.
  • Have a completed copy of your last year’s tax return – or possibly your return from two years ago – handy. Information on that return can help you estimate income and other items for this year. However, note that the new tax law made significant changes to itemized deductions.

Use the results from the Withholding Calculator to determine if you should complete a new W-4 form and, if so, what information to put on it. If you complete a new W-4, you should submit it to your employer as soon as possible. Doing this early means there’s more time for tax withholding to take place evenly during the rest of the year. Waiting until later in the year means there are fewer pay periods to make the tax changes – which could have a bigger impact on each paycheck.

For people with more complicated financial, 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:

  • 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 with dependents age 17 or older.
  • People who itemized deductions last year.
  • People with high incomes and more complex tax returns.
  • People with a large tax refund or large tax bill for last year.

For more information, visit http://www.irs.gov/withholding.