Even though we are knee-deep in the 2017 tax season, it’s not too early to start thinking about 2018 taxes. Given tax reforms in the Tax Cuts and Jobs Act, wage earners should be sure to review and, if necessary, adjust their tax withholding. You can start this process using the IRS 2018 Withholding Calculator to do a “paycheck checkup” and help you determine whether your tax withholdings are appropriate.
Why is it important to check your withholdings? Paying too much or too little can have consequences:
- Having too little tax withheld over the course of the year can result in a steep tax bill and possible tax penalties upon filing your return
- Having too much tax withheld generates a refund check, but the overpayment is money that you could be putting to use throughout the year. Overpaying is a bit like loaning your money out to the IRS in a no-interest loan.
The calculator does not require that you enter any identifying information such as your name or Social Security number, but you will need to provide some basic information about your estimated income, tax status, existing withholdings, and deductible expenses. Having your most recent pay stub and a copy of your previous tax return available before you get started can help speed the process along.
If you find that you need to adjust your withholdings, complete a new Form W-4, the Employee’s Withholding Allowance Certificate, and submit it to your employer.
Looking for more information? Check out the IRS tips for using the calculator: https://www.irs.gov/individuals/irs-withholding-calculator
2018 Withholdings Calculator here: https://apps.irs.gov/app/withholdingcalculator/
Form W-4 here: https://www.irs.gov/pub/irs-pdf/fw4.pdf