When Was the Last Time You Did a Paycheck Check-Up?
In light of the 2017 Tax Cuts and Jobs Act and the various regulations and updates that proceeded from it, the IRS has issued multiple calls for taxpayers to check their withholdings. In an effort to make these “paycheck checkups” easier, the IRS recently released a new tax withholding estimator. The simple, online tool helps taxpayers determine whether they need to update their Form W-4 to adjust their income tax withholding.
Why Should You Check Your Withholding?
In general, the IRS encourages everyone to check their withholding because doing so can help taxpayers avoid unexpected tax bills and the penalties that under-withholding can incur. Conversely, some taxpayers have the opposite problem—they are withholding too much. According to the IRS, the average refund is around $2,800. Adjusting your withholding can put more money in your pocket throughout the year, rather than forcing you to wait to receive a lump sum from the tax bureau come April 15th.
In addition to the general call for withholding checks, there are specific life changes that merit a paycheck checkup. These include:
- Getting an additional job
- A spouse getting a new or additional job
- Being unemployed for part of the year
- Marriage or divorce
- Having (or adopting) a child
What Do You Need to Check Your Withholding?
Before you navigate to the Tax Withholding Estimator, make sure you have all the information you will need to perform a complete checkup. You will need:
- Your most recent pay stubs
- Your most recent income tax return
- The number of children you will claim for the Child Tax Credit and Earned Income Tax Credit
- Information regarding other items that will affect your 2019 taxes
What Information Does the Tax Withholding Estimator Require?
The IRS’ tax tool will ask for information in the following categories:
- Your tax filing status, number of dependents, and source(s) of income
- Your estimated income (based on your most recent pay stub)
- Any adjustments (e.g., student loan interest deduction, health savings account deduction, etc.)
- Any deductions (includes the options to itemize or take the standard deduction)
- Any tax credits for which you are eligible (e.g., educational, homeowner, etc.)
Ready to Perform Your Paycheck Checkup?
The new IRS tool is simply and easy to use. The more accurate the information you enter, the more accurate your results will be. In the event that you are having too much or too little federal income tax withheld, you should complete a new Form W-4 and turn it in to your employer as soon as possible. To access the new Tax Withholding Estimator, visit irs.gov.