IRS: Withholdings need to be checked under new tax law
The 2017 tax cut likely added some extra money to the paycheck. Nothing wrong with that.
But the Internal Revenue Service advises that taxpayers with children and other dependents check what’s being deducted — a “paycheck checkup” — to make sure the adjusted amount doesn’t leave them owing at the end of the year.
Changes made by the 2017 Tax Cuts and Jobs Act will affect 2018 returns taxpayers will file in 2019, the IRS advises.
The law expanded and made significant changes to the Child Tax Credit, raising it from $1,000 to $2,000. But it also suspended the deduction for personal exemptions, which means parents and caregivers should determine how these changes could affect their 2018 tax situation.
Some of the changes include:
— The phasing out of the Child Tax Credit and the Additional Child Tax Credit will now begin at $400,000 for couples and $200,000 for singles, compared with 2017 amounts of $110,000 for couples and $75,000 for singles.
— Dependents who can’t be claimed for the Child Tax Credit may still qualify taxpayers for the Credit for Other Dependents. This is a credit of up to $500 per qualifying person. The phase-out amounts of the Child Tax Credit apply to this credit.
Taxpayers have been able to use the IRS’s Interactive Tax Assistant since January to see if they’re eligible to claim the Child Tax Credit and Credit for Other Dependents. For more information about these credits, go to “Steps to Take Now to Get a Jump on Next Year’s Taxes” on IRS.gov.
It’s worth checking now, so if a withholding adjustment is necessary, time remains to do so evenly during the rest of the year. Waiting means there are fewer pay periods to withhold the necessary federal tax — so the change in withholding from each remaining paycheck will be much greater.
To use the Withholding Calculator at www.irs.gov/individuals/irs-withholding-calculator, taxpayers should have their 2017 tax returns and most recent paystubs available to determine their proper withholding for 2018.
The Withholding Calculator results depend on the accuracy of information entered. Taxpayers whose personal circumstances change during the year should return to the calculator to see if their withholding should also be changed.
Taxpayers who change their withholding for 2018 should recheck their withholding at the start of 2019. This is especially important for taxpayers who reduce their withholding sometime during 2018. A mid-year withholding change in 2018 may have a different full-year impact in 2019. If taxpayers don’t submit a new Form W-4 for 2019, their withholding might be higher or lower than intended. To help protect against having too little withheld in 2019, taxpayers should check their withholding again early in 2019, according to the IRS.
The Withholding Calculator doesn’t request personally identifiable information, such as name, Social Security number, address or bank account number. The IRS doesn’t save or record information entered in the calculator.
Taxpayers should watch out for tax scams, via email or phone calls, and be especially alert to cybercriminals impersonating the IRS. The IRS doesn’t send emails related to the calculator or the information entered.
The Withholding Calculator will recommend how to complete new Forms W-4 with all employers. If a taxpayer is at risk of being under-withheld, the calculator will recommend an additional amount of tax withholding for each job. The taxpayer can enter these amounts on their respective Forms W-4.
Taxpayers may also need to determine if they should make adjustments to their state or local withholding. They can contact their state’s department of revenue to learn more.
For more information on these topics, go to www.irs.gov/withholding. For information about steps taxpayers can take now to get a jump on next year’s taxes, including how the new tax law may affect them, go to IRS.gov/getready.
— The Daily News, Iron Mountain