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The Internal Revenue Service has provided America’s employers with the basic information they need to determine how much to withhold in federal taxes from employee paychecks. But it will be up to each taxpayer to make sure they don’t overpay or underpay the government.
The 2018 withholding tables reflect the new tax law’s higher standard individual deduction, the elimination of personal exemptions and changes in tax rates and brackets.
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Most Americans will likely see fatter paychecks reflecting lower tax rates. The increases are expected to range from a few dollars per pay period for low-income workers to hundreds of dollars more for top wage earners. But the elimination and curbs on some itemized deductions mean many workers could also pay higher taxes when they file in 2019.
The IRS says it’s developing a new online withholding calculator to help taxpayers determine what they owe, but the tool won’t be available until sometime in February. Until then, here are some tips from tax professionals:
Review your W-4 withholdings. 2018 IRS tax tables are based on elements of the new tax law. The IRS plans to issue new W-4 forms reflecting 2018 changes in itemized deductions, higher child tax credits, a new dependent credit and the repeal of the exemption for dependents. But for now, the IRS says employees don’t have to make changes on their W-4s.
Still, this would be a good time to review your withholdings based on your income, number of dependents and changes in your personal or financial status, says John Myett, director of government affairs at ADP, which processes payroll checks for about 1 of every 6 U.S. workers.
"The intent is to make the [new tax tables] reflect tax rates as close as possible to what will be owed,’’ Myett says. “Will they be perfect? Probably not.”