Douglas Tax Blog. U.S.A. IRS.GOV/NEWSROOM
Most people are unaware of the IRS withholding calculator. We are often asked the question, am I withholding enough from my taxes to cover what I will owe ? This question comes up usually around tax filing season, but often throughout the tax year. Its important to understand that if you have a set paycheck, and are worried about whether you are withholding enough, then yes, its a good idea to check your withholding, usually at the beginning of the year. And since the tax laws have changed its probably a good idea for just about everyone to do this, because you need to recalculate your taxes anyway.
Its even more important for people with variable income, or those who are self employed to do this. If you are self employed, you need to not only keep track of your expenses, but you need to plan ahead of time, and that starts with determining, through the use of the IRS withholding calculator, whether you are holding enough back in taxes to pay Uncle Sam. If you don’t do this ahead of time, you may find yourself needing tax resolution work, due to poor planning.
When should this be done is another common question. The IRS always states that you should check your withholding early in the year to make sure you have enough tax withheld from your paycheck, or if your self employed, set the right amount aside to pay in your quarterly estimated tax payments. And with the Tax Cuts and Jobs Act, the new law increased the standard deduction, removed personal exemptions, increased child tax credits, limited and or discontinued certain deductions and changed certain tax rates. So it makes sense to try and figure out where you end up. The IRS withholding calculator is designed to do just that.
One last thought, many people believe that the new tax law lowered tax rates for everyone, therefore its not necessary to do this. Wrong. We have found that some people’s taxes have actually gone up, it depends upon the individual situation. Don’t take chances, prepare ahead of time, so you don’t have to call a tax resolution company.