The Tax Cuts and Jobs Act made some changes to the tax law. Following those, it’s especially important for certain people to make sure they have the right amount of withholding in 2018. These groups are:
- Two-income families.
- People working two or more jobs or who only work for part of the year.
- People with children who claim credits such as the Child Tax Credit.
- People with older dependents, including children age 17 or older.
- People who itemized deductions in 2017.
- People with high incomes and more complex tax returns.
- People with large tax refunds or large tax bills for 2017.
The law increased the standard deduction, removed personal exemptions, increased the child tax credit, limited or discontinued certain deductions and changed the tax rates and brackets. See information below about the IRS Withholding Calculator, which can help taxpayers check their withholding.
- Tax Reform Tax Tips
- News Release IR-2018-73, March 26, 2018 – IRS Encourages “Paycheck Checkup” for Taxpayers to Check Their Withholding; Special Week Focuses On Changes
- News Release IR-2018-36, Feb. 28, 2018 – Updated Withholding Calculator, Form W-4 Released; Calculator Helps Taxpayers Review Withholding Following New Tax Law
- News Release IR-2018-05, Jan. 11, 2018 – Updated 2018 Withholding Tables Now Available; Taxpayers Could See Paycheck Changes by February
- Withholding Calculator Frequently Asked Questions
- IRS Withholding Tables Frequently Asked Questions
- IRS YouTube Videos:
The federal income tax is a pay-as-you-go tax. There are two ways to pay as you go, either through withholding or estimated tax payments.
If you are an employee, your employer probably withholds income tax from your pay. Your pay includes your regular pay, bonuses, commissions, and vacation pay. It also includes reimbursements and other expense allowances paid under a non-accountable plan. Tax may also be withheld from certain other income — including pensions, bonuses, commissions, and gambling winnings. In each case, the amount withheld is paid to the IRS in your name.
Use the IRS Withholding Calculator to Figure Your Federal Income Tax and Withholding
The Withholding Calculator is a tool on IRS.gov designed to help you determine how to have the right amount of tax withheld from your paychecks. When you use the Withholding Calculator, it will help you determine if you need to adjust your withholding and submit a new Form W-4 to your employer.
Completing Form W–4 to Change Your Withholding
The amount of income tax your employer withholds from your regular pay depends on two things.
- The amount you earn
- The information you give your employer on Form W–4.
Form W–4 includes three types of information that determine the amount your employer will withhold.
- Whether to withhold at the single rate or at the lower married rate.
- How many withholding allowances you claim. (Each allowance reduces the amount withheld.)
- Whether you want an additional amount withheld.
Note: You must specify a filing status and a number of withholding allowances on Form W–4. You cannot specify only a dollar amount of withholding.
Tip: Employees who use the Withholding Calculator to check their withholding do not need to complete any of the worksheets on the Form W-4.
No Form W–4
If you do not give your employer a completed Form W–4, your employer must withhold at the highest rate—as if you were single and claimed no allowances.
If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. People who are in business for themselves generally will have to pay their tax this way. You may have to pay estimated tax if you receive income such as dividends, interest, capital gains, rent, and royalties. Estimated tax is used to pay not only income tax, but self-employment tax and alternative minimum tax as well.
Additional Withholding Information
When to Change Your Withholding
When There are Tax Law Changes
Anytime there are changes in the tax law, the IRS encourages you to check your paycheck to ensure you’re having the right amount of tax withheld for your personal situation.
If changes to withholding should be made, the Withholding Calculator gives you the information you need to fill out a new Form W-4, Employee’s Withholding Allowance Certificate. You’ll then submit the completed W-4 to your employer.
When You Have a Change in Your Life That Affects Your Withholding Allowances
Events during the year may change your marital status or adjustments, deductions or credits you expect to claim on your return. When this happens, you may need to give your employer a new Form W–4 to change your withholding status or number of allowances.
If the event changes your withholding status or the number of allowances you are claiming, you must give your employer a new Form W–4 within 10 days (see Notice 1036 for more information) after any of the following.
- Your divorce, if you have been claiming married status.
- Any event that decreases the number of withholding allowances you can claim.
Generally, you can submit a new Form W–4 whenever you wish to change the number of your withholding allowances for any other reason.
Changing your withholding for the current year: If events in the prior year will decrease the number of your withholding allowances for this year, you must give your employer a new Form W–4 by December 1 of the prior year. If the event occurs in December of the prior year, submit a new Form W–4 within 10 days. See Notice 1036 for more information.
More Information about Using the Withholding Calculator or Form W–4 Worksheets
When you start a new job, you must fill out IRS Form W–4 and give it to your employer. The Withholding Calculator can help you determine how to have the right amount of tax withheld from your paycheck. You can also use the worksheet from the Form W-4. Your employer should have blank copies of the form. If you need to change the information later, you must fill out a new form.
If you later fill out a new Form W–4, your employer can put it into effect as soon as possible. The deadline for putting it into effect is the start of the first payroll period ending 30 or more days after you turn it in.
If you work only part of the year (for example, you start working after the beginning of the year), too much tax may be withheld. You may be able to avoid over-withholding if your employer agrees to use the part-year method.
If you have income from two jobs at the same time, be sure to include information about both jobs when you use the Withholding Calculator (or complete only one set of Form W–4 worksheets that includes both jobs). The Withholding Calculator will recommend how to split your allowances between the Forms W–4 for each job. However, you can claim all your allowances with one employer and none with the other, or divide them any other way. You cannot claim the same allowances with more than one employer at the same time.
If both you and your spouse are employed and expect to file a joint return, figure your withholding allowances using your combined income, adjustments, deductions, exemptions, and credits. Use information from both spouses in the Withholding Calculator (or use only one set of Form W-4 worksheets that includes information from both spouses). You can divide your total allowances any way, but you cannot claim an allowance that your spouse also claims.
If you and your spouse expect to file separate returns, use the Withholding Calculator separately to figure your allowances based on your own individual income, adjustments, deductions. Or, use separate Form W-4 worksheets.
Getting the Right Amount of Tax Withheld
In most situations, the tax withheld from your pay will be close to the tax you figure on your return if you follow these two rules.
- You accurately complete the Withholding Calculator or the Form W–4 worksheets that apply to you.
- You give your employer a new Form W–4 when changes occur.
Keep in mind the Withholding Calculator results (or Form W-4 worksheet results) are only as accurate as the information entered. If your circumstances change during the year, come back to the calculator to make sure your withholding is still correct.
Because the Withholding Calculator, W-4 worksheets and withholding methods do not account for all possible situations, you may not be getting the right amount withheld. This is most likely to happen in the following situations.
- You are married and both you and your spouse work.
- You have more than one job at a time.
- You have non-wage income, such as interest, dividends, alimony, unemployment compensation, or self-employment income.
- You will owe additional amounts with your return, such as self-employment tax.
- Your withholding is based on obsolete Form W–4 information for a substantial part of the year.
Repaying Withheld Tax
If you find you are having too much tax withheld because you did not claim all the withholding allowances to which you are entitled, you should give your employer a new Form W–4. Your employer cannot repay any of the tax previously withheld.
However, if your employer has withheld more than the correct amount of tax for the Form W–4 you have in effect, you do not have to fill out a new Form W–4 to have your withholding lowered to the correct amount. Your employer can repay the amount that was incorrectly withheld. If you are not repaid, your Form W–2 will reflect the full amount actually withheld.
Claiming Exemption from Tax
If you claim exemption from withholding, your employer will not withhold federal income tax from your wages. The exemption applies only to income tax, not to Social Security or Medicare tax. See Notice 2018-14 for more information.
You can claim exemption from withholding for the current year only if both the following situations apply.
- For the prior year, you had a right to a refund of all federal income tax withheld because you had no tax liability.
- For the current year, you expect a refund of all federal income tax withheld because you expect to have no tax liability.
If you are a student, you are not automatically exempt. If you work only part time or only during the summer, you may qualify for exemption from withholding.
The Withholding Calculator is a tool on IRS.gov designed to help you determine how to have the right amount of tax withheld from your paycheck. When you use the Withholding Calculator, it will help you determine if you need to adjust you withholding and submit a new Form W-4 to your employer.
Net Investment Income Tax
The 3.8 percent Net Investment Income Tax applies to individuals, estates and trusts that have certain investment income above certain threshold amounts. For additional information on the Net Investment Income Tax, see our questions and answers.
Additional Medicare Tax
The 0.9 percent Additional Medicare Tax applies to an individual’s wages, Railroad Retirement Tax Act compensation, and self-employment income that exceeds a threshold amount based on the individual’s filing status. The threshold amounts are $250,000 for married taxpayers who file jointly, $125,000 for married taxpayers who file separately, and $200,000 for all other taxpayers. An employer is responsible for withholding the Additional Medicare Tax from wages or compensation it pays to an employee in excess of $200,000 in a calendar year. For additional information on the Additional Medicare Tax, see our questions and answers.