(CNN/Meredith) – As the IRS implements the new tax plan, you could see a bump in your paycheck. The Congressional Budget Office estimates employers will likely withhold between $10 and $15 billion less from workers every month.
Meaning more money for you.
Payroll service ADP crunched the numbers: let's say you are a single filer getting paid twice a month, taking one withholding allowance, contributing five percent to a 401(k); if you’re making $57,000 a year, you could see $60 more in each check.
If you make about $162,000 a year - expect to see about $190 more.
Let's look at married workers who file jointly, put five percent in a 401(k) and get paid every two weeks; if they take two allowances, the joint filer making $61,000 could see an extra $40 a pay period.
Remember, your take-home pay depends on much more than just your salary and allowances.
State and local taxes, as well as health deductions, may also impact your pay and could eat up any potential extra cash.
When will I see a change in my paycheck?
The IRS has encouraged employers to start using the new withholding tables by February 15, but it may take your employer longer to make the change.
"I can't say that this particular change is appreciably more difficult than in other years. But what will be different is the time pressure and the pressure from employees, who are going to be more sensitive to this," said Jonathan Zimmerman, a partner at Morgan Lewis, who helps employers with benefit plans and payroll matters.
Don't expect your employer to advise you on whether you should change your allowances on the W-4, though. Employers should explain the uniqueness of the situation to workers, communicate when the new rates will be implemented, and then suggest consulting with a tax adviser, according to Mike Boro, a partner at the accounting firm PwC.
How can I make sure my pay is accurate?
Wait for your first paycheck that accounts for the new withholding tables before making any changes, said Barbara O'Neill, a CFP and a financial management specialist at the Rutgers Cooperative Extension.
Then, you can estimate what you think it should be and adjust accordingly.
IRS officials said the agency will be publishing a new online calculator by the end of February that can help you decide how to adjust your allowances based on information you provide regarding your income level and number of children under the age of 17.
But you can also try to estimate your 2018 tax liability yourself. Then divide that amount by however many paychecks you'll receive this year.
"If the math is close, hang tight," O'Neill said.
If the math is way off, that's when you'll want to make a change to your Form W-4. You can make a change to the number of allowances you've selected, or you can simply change your allowances to zero and write in how much you want withheld exactly, O'Neill said.
The changes don't need to be made immediately. O'Neill always recommends taking a look mid-year. By then you'll know if you are receiving a raise or if you'll have additional income coming in during the year.
What happens if my withholding is still off?
If too much is withheld, you'll simply get a bigger refund check after filing your 2018 taxes.
This amounts to an "interest-free loan" to the government until then, and could tighten your cash flow, said CFP Jim Guarino.
If too little is withheld, you could owe money after filing and possibly face a tax penalty if the balance is $1,000 or more, Guarino said. Generally, you can avoid paying the penalty in this case if you paid at least 90% of what you owe or at least as much as you owed during the previous tax year.
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