Many taxpayers last year got an ugly surprise: Instead of the anticipated refund, they got hit with a tax bill. After a 2017 tax law that cut taxes for many, the IRS reduced the amount of taxes needed to be withheld from paychecks. The outcome was that many taxpayers didn’t have enough taxes taken out of their 2018 paychecks and ended up owing Uncle Sam.
Since then, the IRS made some changes and redesigned the W-4 form, allowing employers to more accurately calculate income tax withholdings. The somewhat confusing "allowances" that workers used to claim on W-4s are gone. The new W-4 replaces complicated worksheets with straightforward questions. (Find the new form here).
There’s no need to fill out the new form unless you’re starting a new job this year. However, you might want to check it anyway if your withholding seems out of whack. Ideally, tax withholding should be as close as possible to one’s expected tax liability. This won’t generate a huge refund, but it also means you won’t overpay taxes during the year and that’s more money in your paycheck.
If your tax life is simple – you have one job, you don’t file a joint return with a working spouse, you don’t itemize or claim dependents – filling the new W-4 is simple, too. Fill in your name, address, Social Security and filing status; then sign and date the form. Done.
If your tax life is more complex, it’ll take more time to complete the new form. Your employer will also need to know what tax credits and deductions you anticipate claiming.
You can check if you’re having enough taxes withheld using the IRS’s online Tax Withholding Estimator. Read more helpful financial articles from ICMA-RC.