People who have itemized before may be affected by changes from the Tax Cuts and Jobs Act. Those who itemize should use the IRS Withholding Calculator to make sure their employers are withholding the appropriate amount of tax from their paychecks for their financial situation. Due to the significant changes to itemized deductions, your tax bill could be greatly impacted.
The law changes are effective in 2018 and affect the tax returns filed for 2019. The new law makes a number of major changes, including:
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, and this could affect how much a you need to have your employer withhold from your pay. Also, even those who continue to itemize deductions should check their withholding because of changes made by the new tax law.
Waiting to make necessary adjustments means there are fewer pay periods to make the tax changes – which could have a bigger impact on each paycheck.
Having too little tax withheld could result in an unexpected tax bill or penalty at tax time in 2019. Adjusting withholding after a “paycheck checkup” can also prevent employees from having too much tax withheld. With the average refund topping $2,800, some might prefer to have less tax withheld up front and receive more in their paychecks.
Using the Withholding Calculator
When using the Withholding Calculator, you can indicate whether you are taking the standard deduction or itemizing deductions. If you are itemizing, you will enter estimates of your deductions. The Withholding Calculator applies the new law to these amounts when figuring your withholding.
It’s helpful if you have your completed 2017 tax return handy when using the Withholding Calculator. It can help estimate the amount of income, deductions, adjustments and credits to enter. You will also need your most recent pay stubs. These help the calculator compute your withholding so far this year.
Calculator results depend on the accuracy of information entered. If your personal circumstances change during the year, you should return to the calculator to check whether your withholding should be changed.
You can use the results from the Withholding Calculator to help determine if you should complete a new Form W-4 and, if so, what information to put on a new Form W-4.
The Withholding Calculator does not request personally-identifiable information, such as name, Social Security number, address or bank account numbers. The IRS does not save or record the information entered on the calculator.Masterpiece Accounting Services LLC