Payroll

Here’s what taxpayers should know about doing a Paycheck Checkup

Everyone should check their withholding by doing a Paycheck Checkup ASAP, even if they did one in 2018. The federal income tax is a pay-as-you-go tax. This means that taxpayers pay the tax as they earn or receive income during the year. This also means that taxpayers can avoid a surprise at tax time by checking their withholding amount the year before.

By checking their withholding, taxpayers can make sure enough is being taken out of their paychecks or other income to cover the tax owed. Here are some things taxpayers should know about withholding and why checking it is important:

  • An employer generally withholds income tax from their employee’s paycheck. The employers then pays it to the IRS on the taxpayer’s behalf.
  • Anyone who receives a pension or annuity should also check their withholding to make sure their withholding from their pension or annuity cover their taxes.
  • Wages paid, along with any amounts withheld, are reflected on the Form W-2, Wage and Tax Statement. Employees generally receive this statement at the beginning of the year before they must file their taxes.
  • The information an employee gives to their employer on Form W–4, Employee’s Withholding Allowance Certificate and income the employee earned determines withholdings. For the 2019 Form W-4 this includes:
    • Filing status: Either the single rate or the lower married rate.
    • Number of withholding allowances claimed: Each allowance claimed reduces the amount withheld.
    • Additional withholding: An employee can request an additional amount to be withheld from each paycheck.
  • When filling out a 2019 W-4, employees must specify a filing status and their number of withholding allowances. They cannot specify only a dollar amount of withholding.
  • Doing a Paycheck Checkup now is especially important for anyone with a 2018 tax bill.
  • By changing withholding now, employees can boost tax withholding early in 2019 to head off a potential tax bill a year from now. In addition, taxpayers should always check their withholding when a major life event occurs or when their income changes.
  • The best way for people to do a Paycheck Checkup is to use the Withholding Calculator on IRS.gov.

Done with taxes this year? Use 2018 return to get 2019 withholding right 


 

WASHINGTON — Millions of taxpayers filed a 2018 tax return in the last few weeks, making now a prime time for everyone to consider whether their tax situation came out as they expected. If it didn’t, they can use their recently finished 2018 return and the IRS Withholding Calculator to do a Paycheck Checkup and adjust their withholding.

Checking and then adjusting their tax withholding can help make sure they don’t owe more tax than they are expecting. Usually they can also avoid a surprise tax bill and possibly a penalty when they file next year. At the same time, with the average refund more than $2,700, some taxpayers may choose to reduce their withholding to have a larger paycheck and smaller refund.

Now is an ideal time to check withholding, since having a completed tax return is helpful when using the Withholding Calculator on IRS.gov. Since taxpayers need to estimate deductions, credits and other amounts for 2019, having similar information from the 2018 return can make using the Withholding Calculator easier.

Who should do a Paycheck Checkup?

Though doing a Paycheck Checkup is a good idea every year, for many people, it’s even more important this year. This includes anyone who:

  • Adjusted their withholding in 2018 – especially those who did so in the middle or later part of the year.
  • Owed additional tax when they filed their tax return this year.
  • Had a refund that was larger or smaller than expected.
  • Had life changes such as marriage, childbirth, adoption, buying a home or when income changes. 

In addition, most people are affected by changes made in the Tax Cuts and Jobs Act (TCJA), the tax reform legislation enacted in December 2017. These changes included lowered tax rates, increased standard deductions, suspension of personal exemptions, the increased Child Tax Credit and limited or discontinued deductions. As a result, the IRS continues to encourage people to check their withholding, even if they did a Paycheck Checkup in 2018.

This includes taxpayers who:

  • Have children and claim credits, such as the Child Tax Credit
  • Have older dependents, including children age 17 or older
  • Itemized deductions in the past
  • Are a two-income family
  • Have two or more jobs at the same time
  • Only work part of the year
  • Have high income or a complex tax return

Those with more complex situations may need to use Publication 505, Tax Withholding and Estimated Tax, instead of the Withholding Calculator. This includes employees who owe self-employment tax, the alternative minimum tax or tax on unearned income from dependents. It can also help those who receive non-wage income, such as dividends, capital gains, rents and royalties. The publication includes worksheets and examples to guide taxpayers through these special situations.

Sooner is better for a Paycheck Checkup

The IRS urges everyone to do a Paycheck Checkup as early in the year as possible so that if a tax withholding adjustment is needed, there is more time for withholding to happen evenly during the rest of the year. Waiting means there are fewer pay periods to withhold the necessary federal tax.

Changing withholding

Employees can use the results from the Withholding Calculator to see if they need to complete a new Form W-4, Employee’s Withholding Allowance Certificate, and submit it to their employer. In some instances, the calculator may recommend that the employee have an additional flat-dollar amount withheld each pay period. Taxpayers don’t need to send this form to the IRS after giving it to their employer.

Those who don’t pay taxes through withholding, or pay too little tax that way, may still use the Withholding Calculator to determine if they need to pay estimated tax to the IRS quarterly during the year. Those who are self-employed generally pay tax this way. See Form 1040-ES, Estimated Taxes for Individuals, for details.

More information:

IRS Withholding Calculator

The IRS encourages everyone to use the Withholding Calculator to perform a quick “paycheck checkup.”  This is even more important this year because of recent changes to the tax law for 2018.

The Calculator helps you identify your tax withholding to make sure you have the right amount of tax withheld from your paycheck at work.

There are several reasons to check your withholding:

  • Checking your withholding can help protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time next year.
  • At the same time, with the average refund topping $2,800, you may prefer to have less tax withheld up front and receive more in your paychecks.

If you are an employee, the Withholding Calculator helps you determine whether you need to give your employer a new Form W-4, Employee’s Withholding Allowance Certificate. You can use your results from the Calculator to help fill out the form and adjust your income tax withholding.

Plan Ahead: Tips For Using This Program

The Calculator will ask you to estimate values of your 2018 income, the number of children you will claim for the Child Tax Credit and Earned Income Tax Credit, and other items that will affect your 2018 taxes. This process will take a few minutes.

  • Gather your most recent pay stubs.
  • Have your most recent income tax return handy; a copy of your completed Form 1040 will help you estimate your 2018 income and other characteristics and speed the process.
  • Keep in mind that the Calculator’s results will only be as accurate as the information you provide.  If your circumstances change during the year, come back to this Calculator to make sure that your withholding is still correct.
  • The Withholding Calculator does not ask you to provide sensitive personally-identifiable information like your name, Social Security number, address or bank account numbers. The IRS does not save or record the information you enter on the Calculator.

IMPORTANT NOTE: This Withholding Calculator works for most taxpayers. People with more complex tax situations should use the instructions in Publication 505, Tax Withholding and Estimated Tax, expected to be updated in early spring. This includes taxpayers who owe self-employment tax, alternative minimum tax, the tax on unearned income of dependents or certain other taxes, and people with long-term capital gains or qualified dividends.

Ready to start? Make sure Javascript is enabled.

 

Withholding Calculator

To Change Your Withholding:

  • Use your results from this Calculator to help you complete a new Form W-4, Employee’s Withholding Allowance Certificate, and
  • Submit the completed Form to your employer as soon as possible. Withholding takes place throughout the year, so it’s better to take this step as soon as possible.

Special Note for 2019:  If you follow the recommendations at the end of this Calculator and change your withholding for 2018, the IRS reminds you to be sure to recheck your withholding at the start of 2019. This is especially important if you reduce your withholding sometime during 2018. A mid-year withholding change in 2018 may have a different full-year impact in 2019. So if you do not file a new Form W-4 for 2019, your withholding might be higher or lower than you intend. To help protect against having too little withheld in 2019, we encourage checking your withholding again early in 2019.

If you have additional questions about your withholding, consult your employer or tax advisor.

Taxpayers Should Review Their Withholding; Avoid Having Too Much or Too Little Federal Income Tax Withheld

IRS YouTube Video:

IRS Withholding Calculator: English | Spanish

WASHINGTON — The Internal Revenue Service today encouraged taxpayers to consider checking their tax withholding, keeping in mind several factors that could affect potential refunds or taxes they may owe in 2018.

Reviewing the amount of taxes withheld can help taxpayers avoid having too much or too little federal income tax taken from their paychecks. Having the correct amount taken out helps to move taxpayers closer to a zero balance at the end of the year when they file their tax return, which means no taxes owed or refund due.

During the year, changes sometimes occur in a taxpayer’s life, such as in their marital status, that impacts exemptions, adjustments or credits that they will claim on their tax return. When this happens, they need to give their employer a new Form W-4, Employee’s Withholding Allowance Certificate, to change their withholding status or number of allowances.

Employers use the form to figure the amount of federal income tax to be withheld from pay. Making these changes in the late summer or early fall can give taxpayers enough time to adjust their withholdings before the tax year ends in December.

The withholding review takes on even more importance now that federal law requires the IRS to hold refunds a few weeks for some early filers claiming the Earned Income Tax Credit and the Additional Child Tax Credit. In addition, the steps the IRS and state tax administrators are now taking to strengthen protections against identity theft and refund fraud mean some tax returns could face additional review time next year.

So far in 2017, the IRS has issued more than 106 million tax refunds out of the 142 million total individual tax returns processed, with the average refund well over $2,700. Historically, refund dollar amounts have increased over time.

Making a Withholding Adjustment

In many cases, a new Form W-4, Employee’s Withholding Allowance Certificate, is all that is needed to make an adjustment. Taxpayers submit it to their employer, and the employer uses the form to figure the amount of federal income tax to be withheld from their employee’s pay.

The IRS offers several online resources to help taxpayers bring taxes paid closer to what they owe. They are available anytime on IRS.gov. They include:

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