In past blogs, we’ve talked about using the IRS’s online tools to double check the withholdings on your paycheck. This is an important part of tax preparation, and can help your tax season to go a lot more smoothly—especially considering the recent changes brought on by the Tax Cuts and Jobs Act. Many taxpayers experienced a nasty surprise when filing their 2018 returns, and the IRS is looking for ways to make the coming tax season easier on taxpayers.
One of the ways they’re doing this is by introducing the new Tax Withholding Estimator. This tool replaces the old Withholding Calculator, and makes it easier for taxpayers to know how much they should be withholding for taxes each month. Here’s what you need to know about this new tool.
More Helpful for More Taxpayers
The previous Withholding Calculator had much more limited use among taxpayers. Many users felt that it was only helpful for single-wage earners with W2 jobs. The Tax Withholding Estimator, however, accounts for a much wider variety of income sources, and allows taxpayers to input multiple jobs and other sources of income. This makes it a much more useful tool for a much larger number of individuals looking to update their withholdings.
More Friendly User Interface
The old withholding tool had some issues with user-friendliness, which have been corrected with the updated tool. You can now go back and change responses to questions without having to start over, and skip questions that are not relevant to you. The language is clear and easy to follow, and the application walks you through the process step by step, making it simple to get an accurate withholding estimate.
How to Use the Estimator
You should use the Tax Withholding Estimator at least once a year to determine if you are withholding the right amount from you paycheck. If you experience a major change in your life—purchasing a home, having a baby, getting married, and so on—then you should recalculate your withholdings after that life change as well.
To use the Tax Withholding Estimator, you will need to have the following information on hand:
- Your last paycheck for each job you hold
- Your spouse’s last paycheck for each job
- A copy of your previous tax return
- Information pertaining to deductions you hope to itemize
You’ll also need to answer questions regarding your dependents and tax filing status. However, the Estimator will never ask for sensitive information like your Social Security number or contact information, and none of the data you enter is saved or shared.
Once you have all the necessary information on hand, you can find the Tax Withholding Estimator on the IRS’s website. Follow the prompts and enter the information requested. It will take a few minutes, but by the end, you should have a fairly accurate estimate for the amount you should withhold from each paycheck. Remember, the estimate you receive is only as accurate as the data you put in, so try to make sure you have correct information on hand before beginning to use the tool.
If you have any questions or issues with recalculating your paycheck withholdings, contact a Provo tax planner for assistance. We can help you to figure out how much you should hold back from each paycheck, as well as assisting you in updating your W4 form with your employer.