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IRS URGING TAXPAYERS TO GET A PAYCHECK CHECKUP

August 30, 2018

IRS URGING TAXPAYERS TO GET A PAYCHECK CHECKUP

The Internal Revenue Service is encouraging taxpayers to use its Withholding Calculator to perform a "paycheck checkup". While they recommend reviewing your withholding amounts annually, changes from the Tax Cuts and Jobs Act of 2017 have made this a vital step for taxpayers. Taxpayers that do not verify that they are withholding the appropriate amount of tax from their paychecks risk an unexpected tax bill or penalty during tax time. 

The IRS has indicated that it is especially important for taxpayers meeting the following criteria to verify their withholding amounts:

  • Two income families
  • Those working two or more jobs at the same time, or those working only part of the year
  • Claimants of credits like child tax and earned income credit
  • Those with dependents under age 17
  • Those who itemize deductions
  • Taxpayers that received a large tax bill or refund for 2017
  • Those with a high income or complex tax return

Using the IRS' Withholding Calculator will help taxpayers determine if they need to submit a new Form W-4 to their employers. In order to use the calculator, taxpayers need a recent paystub and their most recent income tax return. The information submitted to the calculator does not include sensitive information such as name, address, or Social Security number, and is not saved or maintained by the IRS. The calculator results are only as accurate as the information submitted, so taxpayers should consult their tax preparer to verify the correct withholdings. 

Taxpayers with more complex tax returns are advised to refer to IRS Publication 505, Tax Withholding and Estimated Tax. This includes taxpayers owing self-employment tax, alternative minimum tax, tax on unearned income of dependents, and those with long-term capital gains or qualified dividends. 

The IRS Withholding Calculator can be found here: 
https://apps.irs.gov/app/withholdingcalculator/

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