Even though we just wrapped up the 2017 tax season, it’s not too early to start thinking about 2018 taxes. Given the changes in the Tax Cuts and Jobs Act, wage earners should be sure to review and, if necessary, adjust their tax withholding. You can start this process using the IRS 2018 Withholding Calculator to do a “paycheck checkup” and help you determine whether your tax withholdings are sufficient.
Why is it important to check you withholdings? Having too much withheld can generate a nice refund check, but the overpayment is money that you could be using throughout the year. Overpaying is a bit like loaning your money out to the IRS in a non-interest bearing loan. Having too little withheld throughout the year can result in a tax bill and possible tax penalties upon filing your return.
Having your most recent pay stub and a copy of your tax return available before you get started with your “paycheck checkup” using the withholding calculator can help speed the process along. If you find that you need to adjust your withholdings, complete a new Form W-4 and submit it to your employer.