The Tax Cuts and Jobs Act changed the way tax is calculated. This week the IRS encourages everyone to perform a quick “paycheck checkup” to ensure you have the right amount withheld. CERTIFIED FINANCIAL PLANNER Tony Drake talks with Milwaukee’s WTMJ-4 about a new tool to check your withholding and other important steps to take in light of the tax reform.

 
You will thank yourself come April 2019 if you take the time now to check your withholding. If you are withholding too much out of your paycheck, you will get a big refund next year. That may sound like a good thing, but it’s really not. That’s your money the government is holding interest free. It’s money that you could be investing to grow throughout the year. If you withhold too little, you’ll owe at tax time. Ideally, you want to have just enough withheld so that the amount will come as close as possible to your actual tax liability for the year.

Anyone can benefit from a paycheck checkup, but there are a few groups who should especially consider taking this step:

  • Anyone with a complicated financial situation
  • Two income families
  • People who hold more than one job
  • Anyone who itemized deductions in 2017
  • People who claim credits like the Child Tax Credit
  • Anyone with a complicated financial situation

Watch Out for Tax Scams

The withholding calculator put out by the IRS will not ask you for any information that could identify you, like your name, Social Security number, address or bank account numbers. The calculator also will not store any of the information you enter. It’s always important to watch out for scams, because there could be imposters pretending to be with the IRS. Remember, the IRS will not email you about the calculator. If you get an email from someone claiming to be with the IRS, report it.

Your 2017 tax returns will not be affected, so plan to file your taxes as usual this year. However, this may be the last year you itemize your taxes. The standard deduction is nearly doubling (from $12,700 for married couples filing jointly to $24,000.) That means many households will lose their incentive to itemize, starting with their 2018 taxes.

Click here for the IRS Tax Calculator.