In January the Internal Revenue Service (IRS) released new withholding tables, based upon the changes for 2018 from the Tax Cuts and Jobs Act (TCJA). On February 28th the IRS released an online tool for calculating proper withholding after TCJA. The tool may be found at https://www.irs.gov/individuals/irs-withholding-calculator. The IRS called using this tool a “paycheck checkup.”
Using the tool should be a useful exercise for every taxpayer. Those who are especially affected include:
- two-income families;
- persons with two or more jobs, or who work only part of the year;
- those who have itemized deductions in recent years;
- those who claim child tax credits
Taxpayers with high incomes and more complex tax returns will have to wait for Publication 505, Tax Withholding and Estimated Tax, expected to be available later this spring.
To use the online tool, one needs to have recent paystubs, and it will be helpful as well to have one’s latest tax return. Using the calculator does not give any information to the IRS, as nothing will be saved from a session of usage. No sensitive information, such as Social Security Numbers, will be needed to use the tool. The IRS is concerned that tax scammers may try to take advantage of the new tool, so taxpayers should pay no attention to e-mails that claim to be linked in any way to the withholding tool.
If the online exercise suggests that the withholding needs to be changed, a completed Form W-4 will need to be filed with the employer.
According to the IRS, the average refund check is now over $2,800. Some taxpayers may want to reduce their withholding simply to ease their cash flow through the year.