Many taxpayers will see a decrease in their 2018 tax bill thanks to the Tax Cuts and Jobs Act of 2017 that was passed in December. In anticipation of the tax decreases from the new law, the IRS updated the income tax withholding tables for 2018. As a result, most W-2 employees have likely already seen an adjustment in their paychecks. But even though the IRS has already adjusted withholding for 2018, this is a great reminder that you should look at your withholding any time there is a change in your life that could effect on your taxes.
The IRS has provided a tool to help taxpayers determine what they need to withhold. The website allows you to enter your information for the coming year and determine if your withholding is appropriate.
Some people like to pay in just enough to cover what they owe and others prefer to give themselves a little cushion so they will get a refund each year. Either way, the withholding calculator can help you see where you stand, which is especially important in a year with as many tax law changes as 2018.
If you do find that you need to make changes, you can file a new W-4 with your employer at any time during the year.
If you find that your W-2 withholding is not enough because you have substantial income beyond your W-2 wages, then you might need to pay quarterly estimates as well. In that case, you will probably want to reach out to your Henry+Horne tax professional to help you determine what needs to be done.
Michael Anderson, CPA