DENVER -- You may be taking home more money in your paycheck right now because of the Tax Cuts and Jobs Act of 2017, but the IRS says now is the time to make sure you are withholding the proper amount. Otherwise you could be on the hook for a surprise tax bill in 2019.
"Our concern is that there may be folks who are going to be under-withheld because of the tax bill and that’s because of the tax law provisions," says Karen Connelly, a spokesperson for the IRS in Colorado.
The new tax law increased the standard deduction, removed personal exemptions, and increased the child tax credit. It also limited and discontinued certain other deductions and changed the tax rates and brackets.
"There are certain groups in particular that may face a change and they may not be aware. That’s two income families, people who work two or more jobs or only work part of the year, people with kids who claim credits like the child tax credit and also people with older dependents including children over 17," said Connelly.
So for example, if you have 5 children, in the past you may have claimed them as personal exemptions, and also taken the child tax credit. Now you can only take the credit on those kids under 17. And you can no longer claim them as personal exemptions. So that 17 year old really isn't worth anything to you, from a tax standpoint.
"You don’t get an exemption and they don’t qualify for a child tax credit. So while you may have supported them throughout the year you really don’t get a tax credit," says Connelly.
The IRS is launching a campaign this week encouraging people to make changes to their W-4 forms so they're withholding the proper amount. You can access both a withholding calculator and new form W4 on the IRS website.
You will need your most recent pay stub and a copy of your recent filed tax return to use the calculator.