Avoid an IRS Bill with a Paycheck Checkup
The Tax Cut and Jobs Act have increased the standard deduction and raised the tax credits for families with children. But you could find yourself owing the IRS if you do not adjust your tax withholding.
To avoid any surprises at the end of the year, the IRS is encouraging every taxpayer to do some tax planning now.
One way to do that is to use out free 2018 Tax Calculator on our website, which will allow you to either select a profiled scenario or create a scenario based on your unique situation to see the amount that should be withheld from your paycheck.
It is even more important for you to do a paycheck checkup on your withholding using the 2018 Tax Calculator if you fall into one of these groups:
• If you claim the Child Tax Credit
• If you itemized deductions in 2017
• If you received a large refund or paid a large tax bill on their 2017 tax return
• If you are two-income families
• If you held two or more jobs during the year
Claiming the Child Tax Credit
The TCJA has increased the Child Tax Credit from $1,000 to $2,000 per qualifying child. So, taxpayers who claim the Child Tax Credit could see an increase in their 2018 tax refund.
If your income was too high in 2017 to receive the tax credit, then you may qualify this year. The child tax credit was raised for qualifying families to $400,000 for married and $200,000 for single filers. This is a big jump from 2017 income limits which was $110,000 for married, and $75,000 for single filers.
If you happen to fall into this scenario than you may see, after using the 2018 Tax Calculator, that you are having too much withheld from your paycheck. You can change your withholding to have more take-home pay on your check.
Taxpayers who itemize
If you typically itemize your deductions you could find that you are not having enough taxes withheld. The new tax law has eliminated some tax deductions that you may be used to receiving. If you are not having enough withheld throughout the year, then you will have a hefty tax bill due at the end of the year. Run your scenario through the tax calculator so you can avoid any tax surprises when you file. You still have enough time to check your paycheck an make any necessary adjustments to your tax withholding and spread it out to the end of the year.
If you prefer less tax withheld now and to receive more take-home pay, it’s worth looking at your situation. If you do, just remember this; a mid-year withholding change in 2018 will have a different full-year impact for 2019. Make sure you repeat the process of using the tool again in January 2019 to avoid having too little withheld for 2019.