One of the most significant promises of the recent tax reform bill was to cut taxes for most Americans. According to the Internal Revenue Service (IRS), about 90% can expect to see bigger paychecks this February! And of course how much will depend on your situation.
Just recently, the IRS released its new withholding tax tables. These tables are used by employers and payroll companies to determine the correct amount of taxes based on an individual’s income and filing status. The new withholding tax tables are expected to assist with the latest updates in the recent tax reform bill. As such, the IRS encourages all employers to start using the tables as soon as possible, but no later than Feb. 15.
But while the tables are updated, employees are reminded to review their withholdings.
When individuals file their tax returns in 2019, having too much withheld can allow Uncle Sam to use your money interest-free throughout the year, whereas having too little withheld can create additional taxes due. As such, the IRS encourages users to utilize the new withholding calculator to determine whether or not you should update your tax withholdings.
The new tax withholding calculator would allow individuals to enter their tax deductions, expected income, and other vital information to determine the correct amount to withhold. It is expected to be available by the end of February.
If an employee discovers he or she is withholding too little or too much, a new W-4 form should be submitted to the human resources department. A W-4 form allows employers to determine the correct amount of taxes to be withheld from an employee’s paycheck. Employees can adjust withholdings based on dependents, deductions, and other relevant information. But keep in mind, the IRS has not issued the W-4 form that reflects the changes to the tax law, so for now, employees should hold tight and monitor their withholdings throughout the year.