July isn’t typically the time of year when most people are thinking about their taxes. But, according to the IRS, it’s the perfect time to take a closer look at the impact of the new tax law on your paycheck.
At the beginning of this year, major changes to federal income tax rates went into effect, resulting in bigger paychecks for many of us. While everyone likes a bigger paycheck, you don’t want it to come at the expense of a large tax bill in April. But how can you tell if the changes to the tax code will impact your 2018 taxes?
The IRS has created a Withholding Calculator to help people estimate the taxes they will owe in 2018 and prevent them from having too much or too little withheld from their paycheck. If you fall into one of the following categories, it’s crucial that you check your withholding:
- 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
To ensure that the Withholding Calculator provides you with accurate information, you’ll need your most recent pay stub and a copy of your most recent income tax return. These documents will help you estimate your 2018 income and the amount of any dedications and tax credits you plan to take.
If changes to your withholding need to be made, the Withholding Calculator will give you the information you need to fill out a new Form W-4 that can be submitted to your employer.
For more information, visit www.irs.gov or contact your Certified Public Accountant (CPA).