IRS to Small Businesses: Here’s a New Tool so You Don’t Pay Too Much Taxes
While it may not feel like spring every day, it’s still tax season. And this tax season will be different from previous ones thanks to the recently passed Tax Cuts and Jobs Act, which changed the way tax is calculated. The IRS encourages everyone to perform a quick “paycheck checkup” to ensure you have the right amount withheld. Here’s how:
Taxes are pay-as-you-go. This means that you need to pay most of your tax during the year, as you receive income, rather than paying at the end of the year. Checking your withholding can help protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time next year.
The IRS.gov withholding calculator can be used by taxpayers who want to update their withholding in response to the new law or who start a new job or have other changes in their personal circumstances in 2018.
As a first step to reflect the tax law changes, the IRS released new withholding tables in January. These tables were designed to produce the correct amount of tax withholding (avoiding under- and over-withholding of tax) for those with simple tax situations. This means that people with simple situations might not need to make any changes. Simple situations include singles and married couples with only one job, those who have no dependents and those who have not claimed itemized deductions or adjustments to income or tax credits.
People with more complicated financial situations might need to revise their W-4 forms. With the new tax law changes, it’s especially important for these people to use the withholding calculator on IRS.gov to make sure they have the right amount of withholding.
Among the groups who should check their withholding are:
- Two-income families.
- People with two or more jobs at the same time or who only work for part of the year.
- People with children who claim credits such as the Child Tax Credit.
- People who itemized deductions in 2017.
- People with high incomes and more complex tax returns.
There are two ways to pay tax:
- Withholding from your pay, your pension or certain government payments, such as Social Security.
- Making quarterly estimated tax payments during the year.
Visit www.irs.gov/withholding for additional details.
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