In December 2017, Congress enacted sweeping changes to the federal tax laws. There has been a great deal of discussion as to whether American workers would see significantly greater take-home pay as a result of the new tax laws. In January, the IRS released new withholding tables to help employers determine how much to withhold from their workers’ paychecks. Employers were supposed to implement the new withholding changes by February 15th. Now the Treasury Department has released a withholding calculator for American workers to determine if employers are withholding the correct amount. That calculator can be accessed here.
By now, taxpayers should be seeing some variation on their paychecks. But just because taxpayers are seeing these changes, does not necessarily mean that Uncle Sam is getting his correct share. As with any new law, there could be hiccups with implementation.
We encourage taxpayers to review their withholdings through Treasury’s calculator. Taxpayers are required to withhold taxes during the year. Failures to withhold sufficient taxes could subject taxpayers to underpayment penalties. If after using the calculator taxpayers discover that not enough taxes are being withheld, taxpayers should prepare and submit a new Form W-4 to their employers.
The alternative—an unpleasant surprise come 2018 tax return season—can be avoided.