As many of you know may know, the recent tax reform bill brings significant tax changes to both corporations and individuals (e.g. standard deduction, personal exemption, tax breaks, penalty eliminations, etc.). One of the more under-discussed topics is how the new tax law affects your paycheck. The IRS has released a new tax withholding calculator for individuals to review their withholdings and update their W-4 as necessary. The Internal Revenue Service (IRS) is highly encouraging taxpayers to review their paycheck in preparation for their 2018 tax return in 2019.
“Following the major changes in the tax law, the IRS encourages employees to check their paychecks to help ensure they’re having the right amount of tax withheld for their personal situation,” said Acting IRS Commissioner David Kautter.
The IRS lists several tips for using their withholding calculator:
- Gather your most recent pay stubs.
- Have your most recent income tax return handy; a copy of your completed Form 1040 will help you estimate your 2018 income and other characteristics and speed the process.
- Keep in mind that the Calculator’s results will only be as accurate as the information you provide. If your circumstances change during the year, come back to this Calculator to make sure that your withholding is still correct.
- The Withholding Calculator does not ask you to provide sensitive personally-identifiable information like your name, Social Security number, address or bank account numbers. The IRS does not save or record the information you enter on the Calculator.
Check out the IRS Withholding Calculator to complete your paycheck checkup.
To learn more about how this affects you, we recommend checking out this informative article that CNBC published about the importance of this tool and what every employee should do in 2018 in response to the recent tax law.