The IRS’s new online withholding calculator is set to provide taxpayers a glimpse into what their estimated taxes would amount to under the Tax Cuts and Jobs Act.
The much-anticipated IRS withholding calculator was publicly released February 28, along with the 2018 updated Form W-4. Tax professionals said in recent interviews with Tax Analysts that the calculator was more likely to help taxpayers than practitioners.
“This is an exciting time for American workers, who are seeing more money reflected in their checks as a result of tax reform,” Treasury Secretary Steven Mnuchin said in a statement announcing the new calculator. “This ‘paycheck checkup’ is more important than ever and will allow employees to see the tax cuts properly reflected in their withholding,” he said.
The withholding calculator asks taxpayers to estimate their 2018 income, as well as the number of children claimed for the child tax credit and other benefits, so they can use the results to adjust their income withholding on an updated Form W-4 appropriately to their preferences.
The IRS encourages taxpayers to frequently check their pay to ensure proper withholding under the tax law changes, which increased the standard deduction and eliminated personal exemptions, among other changes.
Treasury recommends that before using the calculator, taxpayers gather their most recent pay stubs from work and a completed copy of their most recent tax return.
“There is no need to complete the worksheets that accompany Form W-4 if the calculator is used,” the Treasury statement noted.
Treasury also advised taxpayers to recheck the calculator, and consider adjusting their Form W-4 with their employer, throughout the year after any major change in income or personal circumstances.
Leading up to the calculator’s release, congressional Democrats sought answers on whether the 2018 withholding tables provided protection against underwithholding, requesting information from the IRS about the tables’ development and a Government Accountability Office review of the matter.