New IRS Withholding Calculator
The Internal Revenue Service released the updated withholding calculator and Form W-4 (the links are below) that it had promised for the new tax law to help taxpayers make sure they have the proper amount of taxes taken out of their paychecks. The IRS is urging taxpayers to use both tools to check on their withholding.
The Tax Cuts and Jobs Act made many changes in the tax code, including some trade-off. It doubled the standard deduction but also removed personal exemptions. While it increased the child tax credit, it also limited or discontinued certain deductions and changing the tax rates and brackets. The withholding calculator gives employees information for filling out a new Form W-4. They can then submit a completed W-4 to their employer.
The withholding changes don’t affect the 2017 tax returns that are due this April. However, having a completed 2017 tax return can help taxpayers work with the withholding calculator to decide on their proper withholding for this year and avoid issues when they file their 2018 taxes next year.
Among those who should check their withholding are:
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 income incomes and more complex tax returns.
Link to IRS Withholding Calculator
Link to IRS Form W-4
Summary: The IRS Withholding Calculator can be intimidating but carefully go through the 4 page questionnaire and it will provide a written summary at the top of the 5th page. Don’t treat the calculator as the gospel but an estimate of your potential tax liability/refund for 2018.
The Form W-4 can be tricky, especially with new tax changes. I suggest you maintain your exemptions at your current level, at a minimum, to be sure the appropriate amount is withheld from your check. However each year is different and each taxpayer is different, especially with these new tax law changes. But you may want to change your withholding due to major life changes (marriage, divorce, child going to college, no longer claiming adult child, reduction in itemized deductions, etc.) Please let me know if you have any questions.
Note: This communication is derived from an original article in www.taxprotoday.com