The Internal Revenue Service has officially updated its online withholding calculator to help people who are W-2 employees determine the right amount of money to withhold from their paychecks for taxes due to the change in tax rates effective for 2018. The IRS has also issued a new 2018 Form W-4, Employee’s Withholding Allowance Certificate, which can be helpful if you want to change your withholdings after using the calculator.
You need to have certain information readily available to use the calculator, including an estimate of your 2018 income and other items that affect your taxes, including the number of children claimed for the child tax credit, and the earned income tax credit. This calculator can be used to determine the amount of money to be withheld for taxes in 2018.
Reasons to Check Your Withholdings:
- Checking your withholdings can help protect against having too little tax withheld which can cause an unexpected tax bill or penalty at tax time next year.
- Conversely, you may prefer to withhold a lower amount up-front so you will receive more in your paycheck each week. This would have the effect of reducing your tax refund if you are expecting one.
The IRS explained that in 2018, certain taxpayers would be more likely to have a change in their tax situation necessitating filing a new Form W-4 with their employers, including two-income families, taxpayers with two or more jobs or who work only part of the year, taxpayers with children who will claim credits such as the child tax credit, and taxpayers who itemized deductions in 2017.
The IRS says it anticipates making further withholding changes in 2019. The Service also posted online FAQs regarding the withholding calculator.