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Thursday, June 21, 2018

It's Paycheck Checkup Time!



The Tax Cuts and Jobs Act has changed the way that your income tax is calculated. The IRS encourages taxpayers to perform a quick “paycheck checkup” by using the Withholding Calculator to check if they have the right amount of withholding for their personal situation.  The Calculator helps you identify your tax withholding to make sure you have the right amount of tax withheld from your paycheck at work.  Mid-year is the perfect time for a checkup because you still have time to make a change that will give you the result you want at tax time.

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. 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.

It's also important to check your state withholding separately, since the Tax Cuts & Jobs Act has not changed the Montana withholding tables.