With all the changes included in the new tax law the IRS suggests that you do a paycheck checkup using their Withholding Calculator and, if necessary, complete a new W-4 form so your withholding is correct.
Why Check Your Tax Withholding?
Due to tax law changes, it’s especially important to check your withholding now if you:
- Are a two-income family
- Have two or more jobs at the same time
- Work a seasonal job or only work part of the year
- Claim credits like the child tax credit
- Have dependents age 17 or older
- Itemized your deductions on your 2017 return
- Have high income or a complex tax return
- Had a large tax refund or tax bill for 2017
The IRS says that 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.
So, basically you don't want to end up owing Uncle Sam a big chunk of change next year, also you don't want to get a big refund either. If you get a big refund, that means you have been paying too much tax each payday. You are basically giving the government an interest-free loan for a whole year. Like most of us, you could have been putting that money to good use every two weeks.
The IRS Withholding Calculator
The IRS withholding calculator is available online. It takes about 5 - 10 minutes to fill it out, you should be prepared with last year's tax forms and your pay stubs.
The IRS has created a video that shows you how to use the withholding calculator. Check it out.