IRS Releases New Form W-4 and Withholding Calculator

On February 28, 2018, the IRS released both the new Form W-4 and the Withholding Calculator that reflect changes made by the new tax law. While reviewing your withholding at the beginning of each year is always a good idea, it’s particularly important in 2018 as the Tax Cuts and Jobs Act has made significant changes.

“Following the major changes in the tax law, the IRS encourages employees to check their paychecks to help ensure they’re having the right amount of tax withheld for their personal situation,” said David Kautter, Acting IRS Commissioner.

Who need to check their withholding?

The short answer is “all employees.” Everyone may not need to file a new W-4 with their employers, but claiming the correct withholding helps ensure that the right amount of taxes are withheld from each paycheck. While all employees benefit from this “annual check-up,” the IRS suggests that for 2018, it is especially important for those who have complicated financial situations and listed these groups among those who should check:

  • People who itemized deductions in 2017
  • People who have more than one job at the same time or who work only part of the year
  • People who are part of two-income families
  • People who have older dependents
  • People who claim credits like the Child Tax Credit
  • People with high incomes

Determining the correct number of withholding allowances

The new W-4 form includes multiple worksheets to help you figure out the number of allowances to claim. However, the IRS states that using the Withholding Calculator is the best way to make sure you are not having too little or too much withheld from your paycheck. IRS also indicates that you do not need to complete any of the worksheets if you use the Withholding Calculator to check your withholding.

However, the IRS says that people with more complex tax situations like owing self-employment tax or having capital gains and dividends, might need to use Publication 505, Tax Withholding and Estimated Tax (updated version available this spring), instead of the Withholding Calculator.

IRS tips for using the Withholding Calculator

In a News Release, under the heading Plan Ahead: Tips for Using the Withholding Calculator, the IRS offers an annotated list of tips that are helpful as you prepare to use this tool. Here are a few highlights:

  • Gather your most recent pay stub from work.
  • Have a completed copy of your 2017 (or possibly 2016) tax return handy.
  • Keep in mind the Withholding Calculator results are only as accurate as the information entered.
  • Use the results from the Withholding Calculator to determine if you should complete a new Form W-4 and, if so, what information to put on a new Form W-4.
  • If you complete a new Form W-4, you should submit it to your employer as soon as possible.

Continuing work

While changes have already been made, the IRS will continue to make additional changes involving withholding for 2019.

Helpful IRS Links:

Withholding Calculator Frequently Asked Questions

Updated Withholding Calculator, Form W-4 Released; Calculator Helps Taxpayers Review Withholding Following New Tax Law

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Mary van Balen
Mary van Balen
Technical Writer at Delphia Consulting
Mary van Balen is based out of Columbus, Ohio and is a writer for Delphia Consulting. Mary contributes to the Delphia blog on Human Resources issues and Delphia Consulting and Sage product related updates.