After filing tax returns, many people put taxes far out of their mind. However, taxpayers who received a large tax refund this year should think about taxes again…and the sooner the better. The IRS urges these taxpayers to visit the Withholding Calculator on IRS.gov and do a “paycheck checkup.” Doing so will help them make sure their employers are withholding the correct amount of taxes from their paychecks.
Most taxpayers receive refunds averaging around $2,800. Taxpayers who receive large refunds could receive more of their money throughout the rest of this year, rather than waiting until they file their tax return next year.
The Tax Cuts and Jobs Act was passed last year, and it included many tax law changes. Taxpayers who calculate their tax payments throughout the year in order to receive a refund at tax time should check to see how the new tax law affects them. A “paycheck checkup” can help taxpayers apply the new law changes to their situation.
Here are some of the changes that affect taxpayers who received a refund this year, but also many other people:
- The law reduced tax rates and changed tax brackets.
- The standard deduction nearly doubled. The new rules raise the standard deduction to $24,000 for joint filers and $12,000 for singles for 2018. Many taxpayers who previously itemized their deductions will find the standard deduction is now of bigger benefit.
- The law removed personal exemptions.
- The child tax credit is bigger and the phaseout amount is higher.
- The law added a new tax credit for dependents who can’t be claimed for the child tax credit.
- The law limited or discontinued certain deductions.
The calculator can help navigate each tax situation to make sure the amount withheld best fits the need of every taxpayer. It can help taxpayers decide if getting more money in each paycheck could make more financial sense than getting a refund at tax time next year. Adjusting withholding amounts now can also prevent having too little tax withheld, resulting in an unexpected tax bill next year.
For information about how to use the calculator and how to change withholding, taxpayers can check out the IRS Tax Reform Tax Tips on IRS.gov.
Taxpayers may also need to determine if they should make adjustments to their state or local withholding. They can contact their state’s department of revenue to learn more.