The Internal Revenue Service (IRS) is encouraging taxpayers in certain circumstances to do a quick “paycheck checkup” to protect against withholding too little tax during 2018 and facing an unexpected tax bill and potential penalty in 2019. A checkup can also prevent employees from withholding too much tax, thereby increasing take-home pay throughout the year. This is part of the ongoing implementation of the Tax Cuts and Jobs Act enacted in December 2017.
Employees encouraged by the IRS to check their tax withholding include:
- Two-income families
- People with two or more jobs at the same time or people who only work for part of the year
- People with children who claim credits such as the Child Tax Credit
- People who itemized deductions in 2017
- People with high incomes and more complex tax returns
A new withholding calculator and Form W-4, Employee's Withholding Allowance Certificate, are available for employees to perform their "paycheck checkup". Using information provided by the new calculator, university employees can change their Form W-4 online through Employee Self Service.
Please note that while the calculator is designed to work for most taxpayers, it may not accurately address all circumstances. When using the IRS calculator for individuals paid at the first of the month by the University’s monthly payroll system, the most accurate results appear to come from using the “total tax withheld to date” from the prior month’s earnings statement, rather than the current month. (The calculator incorrectly assumes the university will make an additional monthly withholding during the current tax year.) University employees may also utilize the worksheet on the back of the Form W-4, or other resources made available through the IRS website.
University Payroll Services is unable to provide individuals with tax advice. Concerned employees should consult the irs.gov website and/or a professional tax preparer.
- For questions regarding the new calculator, please refer to the Withholding Calculator Frequently Asked Questions
- Taxpayers with more complex situations might need to use Publication 505, Tax Withholding and Estimated Tax, expected to be available at IRS.gov in early spring, instead of the Withholding Calculator
PREVIOUS JANUARY 2018 NOTICE
UI employees paid monthly will notice a change in their take-home pay starting February 1 due to a federal tax reform bill passed in December. Bi-weekly employees will see changes in their February 6 paychecks.
Employees are not required to take any extra steps regarding their taxes, but the Internal Revenue Service is encouraging taxpayers to review their withholdings and tax circumstances once it releases a new tax withholding calculator in February. University Payroll Services will post a link to the new tax withholding calculator when it becomes available.
The IRS is also revising the Form W-4 but has not given a release date. Before or after the new Form W-4 is released, individuals may wish to adjust their W-4 tax withholding and may do so through the Employee Self Service website.
UI employees paying taxes in Iowa should note that state income tax applies to their taxable income after federal income taxes are withheld, and with lower federal income taxes, many UI employees may have more state tax withheld as a result.
For more information on federal tax changes in 2018, go to the IRS Withholding Tables Frequently Asked Questions. University Payroll Services is unable to provide individuals with tax advice; concerned employees are encouraged to consult with a professional tax preparer.
IRS Withholding Tables Frequently Asked Questions:
Why are these changes being made?
The UI is complying with federal law. The changes in individual income taxes reflect the changes in tax rates and tax brackets, increased standard deduction, and repeal of personal exemptions that were included in the new tax reform law signed in December. The new tax withholding tables for 2018 is the first in a series of steps that the IRS will take to help improve the accuracy of federal tax withholding.
How soon will people see the changes in their paychecks?
Employees will see withholding changes in their February paychecks. Monthly paid employees will see changes to their February 1 paycheck; bi-weekly paid employees will see changes beginning with their February 6 paychecks.
Do employees need to take any action?
Tax withholding updates are made by employers and their payroll providers, so employees are not required to take any extra steps. The IRS will be releasing a new tax calculator in February to help employees ensure withholding is accurate. Taxpayers are advised to use the calculator to determine if any changes should be made in their withholding for future paychecks to avoid over or under withholding of the appropriate amount of taxes.
Should employees check their withholding after the new withholding calculator is available?
The IRS encourages all taxpayers to check their withholding when the new information is available in February. The IRS will help educate taxpayers about the new withholding guidelines and the calculator.
Am I at risk of owing taxes to the government at the end of the year? Am I under-withholding taxes on my paycheck?
Some individuals have more complicated tax situations and face the possibility of owing taxes at the end of next year. For example, individuals who itemize their deductions, couples with multiple jobs, or individuals with more than one job a year will be encouraged to review their tax situations. The IRS is encouraging taxpayers—particularly those with more than one income in their household—to check their withholdings. The IRS is updating the 2018 Form W-4 and the IRS.gov withholding calculator to help with this process.
For more detailed questions and responses, go to the IRS Withholding Tables Frequently Asked Questions.