IR-2018-73, March 26, 2018
WASHINGTON — Launching a special week of activities, the Internal Revenue Service today continued its effort to encourage taxpayers to do a “paycheck checkup” to make sure they have the right amount of tax taken out of their paychecks for their personal situation.
To help taxpayers understand the implications of the Tax Cuts and Jobs Act, the IRS unveiled several new features to help people navigate the issues affecting withholding in their paychecks. The effort includes a new series of plain language Tax Tips, a YouTube video series and other special efforts to help people understand the importance of checking their withholding as soon as possible.
“The IRS is taking special steps to help taxpayers understand these tax law changes,” said Acting IRS Commissioner David Kautter. “We encourage people to do a paycheck checkup to help make sure they’re having the right amount of tax withheld for their unique personal situation. To help with this, the IRS has added and updated a variety of tools and information to help taxpayers.”
The new tax law could affect how much tax someone should have their employer withhold from their paycheck. To help with this, the IRS urged taxpayers to visit the Withholding Calculator on IRS.gov. The Withholding Calculator can help prevent employees from having too little or too much tax withheld from their paycheck. Having too little tax withheld can mean an unexpected tax bill or potentially a penalty at tax time in 2019. And with the average refund topping $2,800, some taxpayers might prefer to have less tax withheld up front and receive more in their paychecks.
Taxpayers can use the Withholding Calculator to estimate their 2018 income tax. The Withholding Calculator compares that estimate to the taxpayer’s current tax withholding and can help them decide if they need to change their withholding with their employer. When using the calculator, it’s helpful to have a completed 2017 tax return available.
Taxpayers who need to adjust their withholding will need to submit a new Form W-4, Employee’s Withholding Allowance Certificate, to their employer. If an employee needs to adjust their withholding, doing so as quickly as possible means there’s more time for tax withholding to take place evenly during the rest of the year. But waiting until later in the year means there are fewer pay periods to make the tax changes – which could have a bigger impact on each paycheck.
Information on “Paycheck Checkup” Available in Several Ways
The IRS is launching a sweeping effort to advise taxpayers about the importance of doing a “paycheck checkup” as soon as possible. In addition to updating the Withholding Calculator and issuing a new Form W-4, the agency is collaborating with tax professionals, partner organizations, employers, community groups and the tax and payroll industries to educate employers and employees about the importance of checking their withholding.
The IRS is also taking additional steps this week:
- Launching a series of Tax Reform Tax Tips, an addition to the IRS’s Tax Tips email-subscription program. These tips will begin this week and continue through 2018. Written in plain language, they can help taxpayers learn about major tax reform topics in understandable terms. The special series begins this week with daily tips covering withholding topics. The series will highlight other law changes in the weeks and months ahead, and taxpayers can subscribe on IRS.gov.
- Issuing a special news release series. During the series, the IRS will focus on some of those groups most likely to be affected by the withholding changes and how the new law may affect their tax situation.
- Sharing new YouTube videos to walk taxpayers through what they need to know about withholding, the Withholding Calculator and filling out a new Form W-4, if needed.
- Using social media to spread the word about #PaycheckCheckup.
Who Needs a Paycheck Checkup
The IRS always recommends employees check their withholding at the beginning of each year or when their personal circumstances change to make sure they’re having the right amount of tax withheld from their paychecks. With the new tax law changes, it’s especially important for certain people to use the Withholding Calculator on IRS.gov to make sure they have the right amount of withholding.
Among the groups who should check their withholding 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.
When personal circumstances change that reduce withholding allowances they are entitled to claim, including divorce, starting a second job, or a child no longer being a dependent, an employee has 10 days to submit a new Form W-4 to their employer claiming the proper number of withholding allowances.
After Using the Withholding Calculator, Change Withholding by Submitting New Form W-4
Taxpayers can use the results from the Withholding Calculator to determine if they should complete a new Form W-4, Employee’s Withholding Allowance Certificate, and, if so, what information to put on it.
If changes to withholding should be made, the Withholding Calculator gives employees the information they need to fill out a new Form W-4. Employees will submit the completed Form W-4 to their employer.
For more details on withholding issues, taxpayers are encouraged to visit IRS.gov.