CHECK TAX WITHHOLDING NOW TO AVOID PAYING FUTURE QUARTERLY ESTIMATED PAYMENTS:
The Internal Revenue Service reminds taxpayers who earn wages to use the Tax Withholding Estimator now to adjust their 2023 withholding. People's tax situations occasionally change through marriage or divorce, adding a child or having one move out on their own. Checking now and making necessary adjustments early in the year may help them avoid the need for quarterly estimated tax payments.
The Tax Withholding Estimator online tool helps taxpayers see if they may get a refund or need to make a payment directly to the IRS to avoid a tax bill and penalties next year.
Income taxes are pay-as-you-go and are normally paid during the year as income is received through withholding from paychecks, pension payments, Social Security benefits or certain other government payments.
In addition, various financial transactions, especially late in the year, can have an unexpected tax impact. Examples include year-end and holiday bonuses, stock dividends, capital gain distributions from mutual funds and stocks, bonds, virtual currency, real estate or other property sold at a profit.
The Tax Withholding Estimator, also available in Spanish, can help wage earners determine if they have too much or too little tax withheld. Taxpayers may use the estimate to change their withholding amount and submit a new Form W-4, Employee's Withholding Certificate, to their employer. The tool offers those who earn wages step-by-step help for tailoring the amount of income tax they should have withheld from their paycheck.
Having a second job or non-wage income from unemployment, self-employment, annuity income, the gig economy or digital assets may require taxpayers make quarterly estimated tax payments to avoid a balance due when they file.
Individuals involved in the gig economy have two ways to cover their taxes due:
- If they have another job where they are considered an employee, they can submit a new Form W-4, Employee's Withholding Certificate to their employer to have more taxes withheld from their paycheck to cover the tax owed from their gig economy activity.
- They can make quarterly estimated tax payments throughout the year.