On February 28, the IRS announced the release of a new Form W-4 as well as an updated Withholding Calculator as part of the Tax Cuts and Jobs Act passed in December, 2017. Although the IRS released the new tax tables mid-January in accordance with the recently passed law, the new Form W-4 has been awaited by HR and payroll administrators to allow employees the ability to revise their W-4 based on the new tax law provisions.
Acting IRS Commissioner David Kautter announced, “Following the major changes in the tax law, the IRS encourages employees to check their paychecks to help ensure they’re having the right amount of tax withheld for their personal situation.”
The Withholding Calculator is designed to help employees make withholding changes based on their personal financial situation and ensure that not too little or too much is withheld from their paychecks. The new tax law includes significant changes such as increasing the standard deduction, removing personal exemptions, increasing the child tax credit, limiting or discontinuing certain deductions, and changing the tax rates and brackets, all of which could impact an employee’s withholding decision. The IRS suggests the following groups should check their withholding situation and make adjustments if necessary:
- 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
Taxpayers with more complex situations might need to use Publication 505, Tax Withholding and Estimated Tax, which is expected to be available on IRS.gov in early spring, instead of the Withholding Calculator.