Tax Tips for Individual Taxpayers

Paycheck Checkup

The IRS has launched a major initiative to encourage all employees to verify that they are having the appropriate amount of federal withholding taxes deducted from their paycheck. In order to use the IRS calculator tool, you will need your most recent pay stub and your most recent tax return.

The IRS Withholding Calculator

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 an average refund topping $2,800, you may prefer to have less withheld up front and receive more in your paychecks.

If you are an employee, the IRS Withholding Calculator helps you determine whether you need to give you empl,oyer 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 you tax withholding. If you receive pension income, you can use the results from the calculator to complete a Form W-4P and give it to your payer.

Plan Ahead: Tips for Using This Program

The Calculator will ask you to estimate values of your 2019 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 2019 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 2019 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 you 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.

Who Will Benefit from the Paycheck Checkup?

Families with two incomes or someone who has multiple jobs may be more vulnerable to being underwithheld or overwithheld following major law changes.

If you work a seasonal job or only work part of the year, any changes that a part-year employee makes to their withholding can affect each paycheck in a larger way than employees who work year-round.

The law expanded and made significant changes to the Child Tax Credit. It also suspended the deduction for personal exemptions. Parents and caregivers should do a Paycheck Checkup to determine how these changes could affect their tax situation.

If you have dependents age 17 or older, the Tax Cuts and Jobs Act added a new credit. Dependents who can’t be claimed for the Child Tax Credit may qualify taxpayers for the Credit for Other Dependents. This is a credit of up to $500 per qualifying person.

If you itemized your deductions in previous years, the Tax Cuts and Jobs Act nearly doubled standard deductions and changed several itemized deductions. Some individuals who formerly itemized may now find it more beneficial to take the standard deduction. This change could affect how much a taxpayer should have their employer withhold from their pay. Even those who continue to itemize deductions should check their withholding because of these changes.

Those taxpayers who have high income or a complex tax return because they are likely affected by more of the changes in the law than people with simpler returns. A Paycheck Checkup is also important for taxpayers who make quarterly estimated tax payments to cover other sources of income or those who are subject to the self-employment tax or alternative minimum tax.

If you had a large tax refund last year, verify that you are having the correct amount taken out of your pay towards federal income taxes.

Conversely, if you had a tax bill last year avoid another surprise by adjusting your payroll withholding accordingly.

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