The Tax Cuts and Jobs Act (TCJA) passed in December 2017 made significant changes to the tax laws, including:
- Increasing the standard deduction: For single filers, the deduction increases to $12,000 from $6,500 and $24,000 for joint filers from $13,000.
- Removing personal exemptions: The deduction for personal allowances is suspended through December 31, 2025, however the IRS will not fully implement the change until the 2019 tax year.
- Increasing the child tax credit: The TCJA increases the maximum child tax credit from $1,000 to $2,000 per qualifying child.
- Limiting or discontinuing certain deductions: Those who itemize will have fewer expenses to deduct and a higher standard to cross.
- Changing the tax rates and brackets: Adjustments were made to 6 of the 7 tax brackets, which employers needed to implement by February 15, 2018.
These changes may cause taxpayers to have too much or too little withheld from their paychecks.
Due to the changes, the IRS encourages all employees to review the amounts being withheld from their paychecks. To help taxpayers ensure they have the correct amount withheld from their paychecks, the IRS created a calculator. The calculator will assist employees in determining the number of allowances to claim on the W-4, Employee Withholding Allowance Certificate, along with any additional amount to be withheld, if necessary.
Employees wanting to change their W-4, can log on to their company’s PaperlessEmployee.com site (www.paperlessemployee.com/companysite) to create a new W-4.