TAS Tax Tip: It’s Always a Good time to Check Your Tax Withholding

March 22, 2019

Finished with your 2018 tax return? If you are, and even if you are not, now might be a good time to check your tax withholding amount for this year, 2019, by doing a paycheck check-up now so you have the right amount of taxes withheld in your paycheck each week. No one likes surprises come tax time and this will hopefully eliminate the chance of any surprise.

Why check it at all?

The Tax Cuts and Jobs Act created a lot of changes for 2018 and for this year too. Some of those relate to tax rates, tax withholding rates, standard deduction amounts, removal of personal exemptions, and much more. One change directly affects the rate at which taxes are withheld from paychecks, for last year and again for this year, generally reducing the amount taken out. This change, combined with the other changes, likely will reduce the amount of an expected refund or may even cause an amount to be owed.

Note: For more information on what other items changed or didn’t change under the Tax Cuts and Jobs Act, visit our new Tax Reform Changes website.

Who should check and when?

It is a good practice for everyone to do a paycheck check-up every year. The earlier in the year that you do this, the more accurate you can be when it comes time to file your tax return next year.

If you filed your 2018 tax return already, you may have noticed how the changes work. If you haven’t filed yet, you may be in for a surprise.

Whether you filed yet or not, it only takes a few minutes to do a paycheck check-up now.

How do you check your withholding?

Use the IRS Withholding Calculator on IRS.gov. This tool is designed to help you determine the right amount of tax withheld from your paycheck.

The Calculator works for most taxpayers; however, people with more complex tax situations should use the instructions in Publication 505, Tax Withholding and Estimated Tax. This includes taxpayers who owe self-employment tax, alternative minimum tax, the tax on unearned income of dependents or certain other taxes, along with people with long-term capital gains or qualified dividends.

Plan ahead: Tips for using the Withholding Calculator

The Calculator will ask you to estimate your 2019 income, number of children you will claim for the Child Tax Credit and Earned Income Tax Credit, and other items that will affect your 2019 taxes. So,

  • Gather your most recent pay stubs, and
  • Have your most recent income tax return handy.

Keep in mind that the Calculator’s results will only be as accurate as the information you provide. If your circumstances change during the year, you should use the Calculator again to make sure that your withholding is still correct.

How do you change your withholding?

If you think you need to make changes to the amount withheld, the calculator gives you the information you need to fill out a new Form W–4, Employee’s Withholding Allowance Certificate. Because this form tells your employer how much you want them to withhold, submit the new W-4 to your employer as soon as possible to make the changes.

What if I don’t have enough withholding or none?

Since our federal income tax is a pay-as-you-go tax system, there are two ways to pay as you go, either through withholding or estimated tax payments. If the amount of income tax withheld from your salary or pension is not enough, if you don’t have any at all, or if you receive income such as interest, dividends, alimony, self-employment income, capital gains, prizes and awards, or other income, you may have to make estimated tax payments. Also, if you are in business for yourself, you might need to make estimated tax payments.

You can use the worksheet in Form 1040-ES (PDF) to figure your estimated tax. Again, it’s a good idea to do this each year, as early in the year as possible.

For more resources and information: