The Internal Revenue Service has released a new online withholding calculator to help people determine their federal tax liabilities under the Tax Cuts and Jobs Act.
The withholding calculator projects how much filers may owe for the tax returns that are due in 2019. Along with the updated tax calculator, the IRS issued a revised W-4 form for those who may want to change their withholding allowances at work.
Employers began adjusting employee paychecks last month after the IRS issued withholding tables that reflect the lower federal tax rates, new tax brackets, increases in standard deductions and the repeal of personal exemptions. Most taxpayers are seeing bigger paychecks. But because key changes to the tax code have eliminated or capped several prized tax deductions, some taxpayers may end the year with a federal tax bill that is higher than what they had planned for.
“Withholding issues can be complicated, and the calculator is designed to help employees make changes based on their personal financial situation,” says acting IRS Commissioner David Kautter. “Taking a few minutes can help taxpayers ensure they don’t have too little — or too much — withheld from their paycheck.”
The IRS recommends filers check their most recent pay stub to gauge how much federal tax is being withheld and check their latest tax returns to see their most recent full year tax bill, then use the calculator to determine if withholding allowances need to be adjusted. Filers aren’t required to provide personal information to use the calculator, but it does ask taxpayers for their estimated 2018 income, filing status, number of dependents and other data.
Certified public accountant Barry Kleiman urges taxpayers to use the calculator as soon as possible. “In addition to the lower tax rates, there are other changes in the tax law that could affect your liability,’’ Kleiman says. “The earlier you make the adjustment, the longer you can spread out the change in withholding over the remaining paychecks for this year.”
Still seeking help on your 2017 tax returns? AARP Foundation Tax-Aide offers free tax preparation assistance. You don’t have to be an AARP member, and there’s no age requirement to get tax assistance from IRS-certified volunteers. Check the Tax-Aide Site Locator for help near you, or call 888-227-7669 toll-free.