IRS Encourages Employees To Do A Paycheck Checkup

The Tax Cuts and Jobs Act passed last December has changed the way federal withholding tax is calculated. The IRS released new withholding tax tables in February which resulted in a reduction in federal income tax withheld from employee paychecks. For some employees, this decrease in tax withholding could lead to a tax bill at the end of the year. The new withholding tables were designed to provide accurate withholding for employees with basic tax pictures. Employees with a more complex tax picture may need to update their Form W-4 to avoid being under withheld at the end of the year.

The IRS has released a tax withholding calculator to help employees determine if they need to update their W-4. All employees are encouraged to perform a paycheck checkup, but it is particularly important for employees with more complex tax situations, as they are more likely to be under withheld. This includes employees with multiple jobs, two income households, taxpayers who itemized deductions last year, and those who claim the child tax credit or have adult dependents.

To help encourage employees to perform a paycheck checkup, the IRS released an informational flyer companies can distribute to their employees. Employees should have a copy of their last pay stub and last year's tax return on hand to ensure the most accurate information is entered in the calculator. The calculator will then advise them on how to complete Form W-4 for tax year 2018.