Many taxpayers, at risk for having too little tax withheld from their pay, can avoid a surprise year-end tax bill by quickly updating the withholding form they give to their employer.
Although the tax reform law, enacted last December, lowered tax rates for most taxpayers, it also nearly doubled the standard deduction and limited or discontinued many deductions, among other changes. As a result, taxpayers who itemized in the past who now choose to take advantage of the increased standard deduction, as well as two-wage-earner households, employees with non-wage sources of income and those with complex tax situations, are at most risk of having too little tax withheld from their pay. This is especially true if they didn’t update their withholding earlier this year.
With employees typically only having one or two pay dates left this year, time is running out to remedy any shortfall through increased withholding. In many cases, affected employees may need to ask their employers to withhold an extra flat-dollar amount from their pay to cover any possible shortfall.
Due to tax reform, many employees’ withholding decreased in early 2018, giving them more money in their paychecks this year. As a result, many may receive a smaller refund or even owe tax, especially if they did not adjust their withholding after the withholding tables changed.
Ever since the revised withholding tables went into effect, the IRS has been urging employees to perform a Paycheck Checkup. The fastest and easiest way to do that is to use the Withholding Calculator, available on IRS.gov.