Paycheck Checkup After The Recent Tax Reform
The recent tax reform bill passed by Congress will change your paycheck. Here’s why you should do a paycheck checkup after the recent tax reform bill.
Every week a certain amount of federal and state taxes are taken out of our paychecks, along with payments towards Social Security and Medicare. The government recently passed a new tax bill that will drastically change how we pay taxes and what is taken out of each employee’s check.
This new tax reform could affect how much tax you should have your employer take out of your paychecks. The best way to know if the right amount is being withheld is by doing a paycheck checkup. It would be best if you didn’t rely on your employer to make adjustments.
Instead, it is the responsibility of an employee to do an employee check for accuracy and make changes to withholdings if needed. We should always take responsibility for our personal finance. Read on to find out if you should do a paycheck checkup.
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Too Little or Too Much
It’s essential to find out if you have too little or too much in the way of taxes withheld from your paycheck. This can prevent an unexpected payment come tax time in 2019.
One way to do an employee check is by using a withholding calculator to estimate your income tax for this year. It will compare your current tax withholding to what should be withheld. This way, you can make adjustments. If adjustments are needed, you’ll need to submit a new Form W-4 to your paycheck manager. The sooner you do this, the better.
Who Needs a Paycheck Checkup
If you have had any major changes in your life, a new job, gotten married, purchased a home, had kids, or moved, then you should check your withholding. In addition, if you fall into any of the below categories, you should also check your withholding:
- Are part of a two-income family
- Work two or more jobs or
- Only work for part of the year
- Have dependent children, including older dependent children who are full-time students
- Itemized deductions in 2017
- Have a high income and more complex tax return
- Had a large tax refund or tax bill last year
Of course, even if you don’t fall into any of these categories, it couldn’t hurt to do a paycheck checkup anyway.
What Changes Did the New Law Make
The law made several large changes which will especially impact those who have had changes in personal circumstances.
Some of these changes include:
- An increase of the standard deduction;
- Removal of personal exemptions;
- An increase of the child tax credit;
- Certain deductions limited or discontinued;
- Changes to the tax rates and brackets.
Of course, if you got married or divorced, changed jobs or started a second job, or had a child or a child is no longer a dependent, you are required to submit a new Form W-4 to your employer and have 10 days to do so.
How to Know what Changes to Make After an Employee Check
Once you know that a new Form W-4 must be submitted, what changes should you make? This, of course, is dependent on your circumstances. If you use the IRS Withholding Calculator, you can make hypothetical adjustments to the number of deductions or have a flat dollar amount taken out of each paycheck.
Once you have an idea of the changes, you can use a fake paystub maker to see what sample paychecks will look like. This will give you an idea of how much will ultimately be taken out for taxes and FICA each pay period after your employee check. For more great articles about business and finance, visit our blog.
