The IRS has urged specific groups of taxpayers to check if the right amount of tax is being withheld from their paychecks following the recently enacted Tax Cuts and Jobs Act. The new law increased the standard deduction, eliminated personal exemptions, increased the Child Tax Credit (CTC), limited or discontinued certain deductions and modified tax rates and tax brackets. The new tax law could possibly have an impact on how much tax a taxpayer should have an employer withhold from his or her paycheck. The IRS has encouraged taxpayers to use the Withholding Calculator, available on the IRS website, for doing a paycheck checkup of sorts as taxpayers complete their 2017 tax returns. In fact, taxpayers can also use the Withholding Calculator to assess their 2018 income tax.
Specific taxpayers who should check their withholding include those who:
- Belong to a two-income family,
- Work two or more jobs or only work for part of the year,
- Have children and claim credits such as the CTC,
- Have older dependents, including children age 17 or older,
- Itemized deductions on their 2017 tax returns,
- Earn high incomes and have more complex tax returns, or
- Received large tax refunds or had large tax bills for 2017.
Taxpayers can use the results from the Withholding Calculator to determine if they must complete a new Form W-4, Employee’s Withholding Allowance Certificate, and, if so, what information to put on it. For more information on how to calculate your paycheck withholdings, contact Larson & Company today.