Check withholdings with new tax law in effect
things, such as paying off debt or taking a vacation.
But Congress passed major tax legislation at the end of last year that could affect your refund if you are one of these folks, according to a recent report by the Government Accountability Office.
Under the Tax Cuts and Jobs Act, the Department of the Treasury had to establish new federal tax-withholding tables. The IRS publishes the withholding tables and employers use them to determine how much tax to withhold from an employee’s paycheck.
Ideally, the goal is to have your withholdings match your actual tax obligation. You might owe a little or get a tiny refund.
So how do you hit the right withholding or something close to it?
Review your W-4 Employee’s Withholding Allowance Certificate. If your tax situation changes — you get married, have a child or purchase a home — you should fill out a new W-4 form.
You can calculate the right number of allowances by using the worksheet on the W-4. Or you can go to irs.gov and search for “Withholding Calculator.”
Once you’ve answered a series of questions, the worksheet or online calculator will suggest a number of allowances you should put down on a revised W-4 to give to your employer.
If you’re receiving Social Security, you may also need to review how much is being withheld from your monthly benefit, Smith said. In this case, you would use the worksheet on the W-4V, the voluntary withholding request form for unemployment compensation and certain federal government and other payments.
Don’t be daunted by this task. If the number you get looks funky, go back through to make sure you answered the questions correctly. Or consult a tax professional.
If you regularly get a refund, you need to perform a paycheck checkup now. And while you’re at it, maybe it’s time you stopped having too much money taken out.