Check Tax Withholding on Your Paycheck
Joe O'Connor, CPA
You have filed your tax return, received your refund, or made your payment, so you are done thinking about taxes for the year, right? Of course not! Now that the new tax law is in effect, it is very important you check the amount of tax being withheld from your paycheck.
The new tax law, which had the most significant changes to the tax code in over 30 years, went into effect January 1, 2018. The new law changed the tax rates that apply to certain levels of income. That means you are most likely paying a different amount of tax based on a new percentage of your income. Therefore, it is important you check with your employer that the correct amount of tax is being withheld. If you have too little withheld, you will end up having to make a tax payment when you file your tax return, and possibly owe a penalty. If too much gets withheld, you will receive a refund. A refund may seem great, but that is money you could have had throughout the year.
Go to https://apps.irs.gov/app/withholdingcalculator/ in order to check the correct amount of tax is being withheld from your paycheck. Have your most recent pay stub and tax return handy. If you need to update the amount being withheld, contact your payroll department. Complete Form W-4 and provide it to your employer. Reminder, the more allowances you claim on Form W-4, the less tax that will be withheld.
You can also make estimated tax payments throughout the year. In order to calculate the amount of tax you should pay each quarter, use the worksheet in Form 1040-ES or have a tax professional assist. Visit https://www.irs.gov/payments to make your payments electronically, or use vouchers included in Form 1040-ES.