The Internal Revenue Service (IRS) wants to help you. That is not intended as a joke; the IRS does want to help you by ensuring you are not having too much (or too little) withheld from your paycheck.
To help in determining how much should be withheld, the agency has set up a Withholding Calculator, available on IRS.gov.
According to the IRS, the average refund is about $2,800. Most taxpayers would probably rather be able to keep most of that money to use during the year rather than loaning it to the federal government as an interest-free loan. The calculator can help taxpayers meet that goal.
Tax Law Changes May Impact Your Next Tax Return
The Tax Cuts and Jobs Act became a law in December 2017. For most taxpayers, including federal retirees, this law may change how your taxes will be calculated.
For example, the new law changed the tax rates and brackets, it increased the standard deduction, removed personal exemptions and limited or discontinued some deductions.
The result is likely to be that most of us will need to raise or lower the amount of tax sent to the IRS throughout the year.
For retirees who receive a monthly pension or annuity check, this may mean changing the amount of federal income tax being withheld.
The Withholding Calculator is primarily designed for employees receiving a regular paycheck. This online tool from the IRS can also be helpful to those receiving a pension or annuity payments on a regular schedule.
How to Use the Calculator
- The Calculator will ask you to estimate values of your 2018 income, the number of children you will claim for the Child Tax Credit and Earned Income Tax Credit, and other items that will affect your 2018 taxes. This process will usually only take a few minutes.
- Gather your most recent pay stubs.
- Have your most recent income tax return handy; a copy of your completed Form 1040 will help estimate your 2018 income and other characteristics and speed up the process.
- Your results will only be as accurate as the information you provide. If your circumstances change during the year, you can return to the Calculator to ensure your withholding is still correct.
- The Withholding Calculator does not ask you to provide sensitive personally-identifiable information like your name, Social Security number, address or bank account numbers. The IRS does not save or record the information you enter on the Calculator.
