The IRS has updated the Withholding Calculator on IRS.gov as well as the new version of Form W-4.
Using the calculator can help you avoid tax liability issues when you file next year. Keep in mind that recent tax law changes do not affect 2017 tax returns due this April. Having a completed 2017 tax return will help taxpayers work with the Withholding Calculator to determine their proper withholding for 2018.
So, why would you want to use the new calculator?
According to the IRS, the average refund is a little over $2,800. If you prefer to have less tax withheld up front and receive more money in your paycheck, this calculator is just what you have been looking for.
Some people with simple tax situations may not need to make any changes. A simple tax situation would include singles and married couples with only one job, with no dependents, and who have not claimed itemized deductions, adjustments to income or tax credits.
The IRS recommends the following groups check their withholdings:

• Two-income families.
• People with two or more jobs at the same time or 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.

It only takes a few minutes, so use the calculator to plan ahead. Here are some tips on using the calculator from the IRS:

• Gather your most recent pay stub from work. Check to make sure it reflects the amount of Federal income tax that you have had withheld so far in 2018.
• Have a completed copy of your 2017 tax return handy. Information on that return can help you estimate income and other items for 2018. However, note that the new tax law made significant changes to itemized deductions.
• Keep in mind the Withholding Calculator results are only as accurate as the information entered. If your circumstances change during the year, come back to the calculator to make sure your withholding is still correct.
• The Withholding Calculator does not request personally-identifiable information such as name, Social Security number, address or bank account numbers. The IRS does not save or record the information entered on the calculator. As always, watch out for tax scams, especially via email or phone calls and be especially alert to cybercriminals impersonating the IRS. The IRS does not send emails related to the calculator or the information entered.
• Use the results from the Withholding Calculator to determine if you should complete a new Form W-4 and, if so, what information to put on a new Form W-4. There is no need to complete the worksheets that accompany Form W-4 if the calculator is used.
• As a general rule, the fewer withholding allowances you enter on the Form W-4 the higher your tax withholding will be. Entering “0” or “1” on line 5 of the W-4 means more tax will be withheld. Entering a bigger number means less tax withholding, resulting in a smaller tax refund or potentially a tax bill or penalty.
• If you complete a new Form W-4, you should submit it to your employer as soon as possible. With withholding occurring throughout the year, it’s better to take this step early on.

For more information call us or see Withholding Calculator Frequently Asked Questions at IRS.gov.

The lingo of taxes often leaves many confused and frustrated. One of the first decisions most taxpayers face is whether to claim the standard deduction or itemize their deductions. So, what exactly do these two tax terms actually mean?
The standard deduction is a dollar amount determined by law and is used to reduce the amount of income on which you are taxed. To keep things confusing, this deduction varies according to your filing status. There are also additional standard deduction amounts for individuals who are blind or over age 65.
Itemized deductions are reported on Schedule A and consist of the total of things like mortgage interest, property tax on your home and charitable contributions. There are several other less common items that can go on the schedule A, like employee business expenses and tax preparation fees. In order for itemizing deductions to be worthwhile, the total of those deductions must exceed the standard deduction amount.
It’s important to understand that you can only use one or the other on your tax return. You cannot claim both the standard deduction and itemized deductions on the same return.

If you have any questions feel free to contact us at (801) 210-1553.