The IRS recently released updated income tax withholding tables. These updates are a result from changes in the Tax Cuts and Jobs Act (TCJA) passed in late 2017. Employers will have until Feb. 15 to update their payroll systems. Employees will start seeing the changes to their paychecks shortly thereafter.
The updates reduce income tax rates for many taxpayers. It’s important to keep an eye on your pay stubs over the coming weeks. If the adjustments are done incorrectly, you’ll either have too much taken out of your paychecks, or too little will be withheld. That means a big tax bill for you at the end of the year.
Here are a couple tips to ensure you’ll be in a good position come the 2018 tax season:
• Check that changes have been made. Many people will see their paychecks increase a bit. If there’s no change or you see a decrease, talk to your employer to find out why. You don’t need to file a new Form W-4 if you already have one on file with your employer.
• Use the withholding calculator. The IRS said it will update its online withholding calculator tool by late February. Check this tool during March to see whether your withholding amounts are correct.
• Check your withholdings midyear. It’s important to make sure you’re having the right amount withheld from your paycheck throughout the year. Check midyear when you still have time to make adjustments. This may be especially helpful if you have multiple jobs, or change jobs this year.
If you have any questions regarding how the TCJA changes affect your situation, don’t hesitate to call.