IRS updated Withholding Calculator, Form W-4 released April 2018 Tax News

Calculator helps your clients review withholding following new tax law

IRS released an updated Withholding Calculator and a new version of Form W-4 to help taxpayers check their 2018 tax withholding following passage of the Tax Cuts and Jobs Act in December.

The IRS urges taxpayers to use these tools to make sure they have the right amount of tax withholding taken out of their paychecks.

The Tax Cuts and Jobs Act made changes to the tax law, including increasing the standard deduction, removing personal exemptions, increasing the child tax credit, limiting or discontinuing certain deductions, and changing the tax rates and brackets. If changes to withholding should be made, the Withholding Calculator gives your clients the information they need to fill out a new Form W-4, Employee’s Withholding Allowance Certificate. Your client will submit the completed W-4 to their employer.

As a first step to reflect the tax law changes, the IRS released new withholding tables in January. These tables were designed to produce the correct amount of tax withholding, avoiding under and over withholding of tax, for those with simple tax situations. This means that people with simple situations might not need to make any changes. Simple situations include singles and married couples with only one job, who have no dependents, and who have not claimed itemized deductions, adjustments to income, or tax credits.

People with more complicated financial situations might need to revise their W-4. With the new tax law changes, it’s especially important for these people to use the Withholding Calculator to make sure they have the right amount of withholding.

Among the groups who should check their withholding are:

• Two-income families.
• People with two or more jobs at the same time or who only work for part of the year.
• People with children who claim credits such as the Child Tax Credit.
• People who itemized deductions in 2017.
• People with high incomes and more complex tax returns.

More information

This spring and throughout the year, IRS will be working closely with businesses as well as the tax and payroll communities to help educate the public about the new withholding guidelines and the Withholding Calculator.

More information is available in the special Withholding Calculator Frequently Asked Questions.