You don’t want to owe money come tax time, and you don’t want the Government holding onto more money than is necessary. With a multitude of changes to the tax code, resulting from the “Tax Cuts and Jobs Act of 2017” that was signed into law December 22, 2017, millions of Americans will see changes in their withholdings. Be prepared.
Paycheck checkups aren’t quite as entertaining as an online quiz that identifies your spirit animal or celebrity lookalike, but they’re significantly more useful if you want to avoid an unexpectedly high tax bill next Spring:
What Is a Paycheck Checkup?
Exactly what it sounds like: Basically you’re checking to makes sure your employer is taking out the right amount of taxes from your paycheck, thus ensuring that you aren’t paying too much or too little. The checkup will compare your current tax withholding to your anticipated tax liability next year and provide an estimated tax liability based on where you fall within the new tax brackets.
How Does a Paycheck Checkup Work?
The amount of money withheld from your paycheck depends on how much you earn and how much information you provide to your employer (via a Form W-4). With new tax brackets taking effect, the amount you need to pay is likely to be different than in previous years.
How Long Does It Take?
Minutes. Depending on how thorough you are, it could take 10 to 25 minutes.
Where Can I Check My Paycheck Withholdings?
The IRS has a calculator–click here–that walks you through the process. Simply input your estimated income, the number of children you’ll claim, and any deductions that might affect your tax liability. Make sure you have a recent pay stub and your most recent income tax return. You can definitely provide more information–and the more details you include, the more accurate your calculations will be–but if you don’t have additional documentation that’s OK.
If your withholding amount needs to be adjusted, fill out a new W-4 and give it to your Human Resources Department. That’s it!
Filing taxes isn’t always a walk in the park, and because liabilities, deductions, dividends, and diversification in investments and incomes can complicate the process, be aware that the withholding calculator provides only an estimate. If you have questions or need assistance with your withholding calculator, don’t hesitate to contact us today.