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In December of 2017 the Tax Cuts and Jobs Act was passed into law and made several changes to the tax code. Many of these changes could affect you. Luckily, the IRS has created an online calculator to help you figure out if the changes mean that you should be increasing or decreasing your withholding rate.

Before we look at the changes and what they may mean for you, a quick refresher on what the withholding tax is. In each paycheck, your employer holds back a percentage of your income and sends it to the government as a contribution to cover your individual income tax liability. This approach helps to ensure that your full tax burden is covered and that you don’t have to pay a single large lump sum to the IRS at tax time. The amount withheld depends on your particular situation and is calculated using a worksheet that you complete, generally when you are first hired. If you withhold at a higher rate than is required to cover your tax liability, you can receive a refund come tax time. If you do not have enough withheld, then you are looking at having to pay the difference that you owe.

The Tax Cuts and Jobs Act made several changes to tax rules related to income tax including:

• Increasing the standard deduction
• Eliminating personal exemptions
• Increasing the Child Tax Credit
• Limiting or discontinuing certain deductions
• Changing the tax rates and brackets

If any of the below applies to you, there is a greater risk of having your current withholding be out of date, according to the IRS.Any of the above could mean that the withholding rate you set up with your employer is no longer correct to match the taxes you will be expected to pay on your 2018 income. It is possible that you are now paying more into the system than you need to, which means you are getting a smaller paycheck and missing out on other ways to invest or use that money. Or, too little could be being taken out, which will mean an unexpected bill when you file your taxes next year.

• Are a two-income family.
• Have two or more jobs at the same time or only work part of the year.
• Claim credits like the Child Tax Credit.
• Have dependents age 17 or older.
• Itemized deductions in 2017.
• Have high income or a complex tax return.
• Had a large tax refund or tax bill for 2017.

Review your Withholding Today

To prevent problems at tax time, the IRS has created an online calculator. The free, online tool is available for anyone to use and gathers a few key pieces of information to help you determine if you should update your withholding rate now, either increasing or decreasing what is withheld during the last three months of this year.

You will need to gather some information to be able to complete the form. Specifically you will need your most recent pay stub from all jobs that you have had this year. If you file taxes jointly, you need this for both people. Last year’s taxes will also help to ensure that you have what you need when asked about things like child and elder care expenses.

The calculator walks through four areas of information; General Information, Credits, Income and Adjustments. By completing this information you get detailed recommendations on what your withholding should now be. There are also links to provide you with easy access to any forms you will need to make the changes with your employer.

Get Started

Do a quick withholding check now and you may find that you have more income available for the holidays than you expected. Or you may need to start planning now for how to save enough to meet your tax requirements. If you have any questions about taxes or the results from the calculator, be sure to seek out the support of a certified and licensed tax professional.