The New IRS Tax Withholding Estimator: Here’s What Taxpayers Should Know
Taxpayers who haven’t yet checked their withholding this year should do so ASAP. All taxpayers can do this by using the new mobile-friendly Tax Withholding Estimator. This new tool can be used by workers, as well as retirees, self-employed individuals and other taxpayers. It’s a user-friendly step-by-step tool to help taxpayers effectively adjust the amount of income tax they have withheld from wages and pension payments. This helps them make sure that they are paying the right amount of tax as they earn it throughout the year.
Here are some things people should know about the new tool:
- Using the tool to do a Paycheck Checkupcan help taxpayers avoid an unexpected year-end tax bill and possibly a penalty when they file their 2019 tax return next year.
- The new tool allows taxpayers to separately enter pensions and other sources of income. Taxpayers who receive pension income can use the results from the estimator to complete a Form W-4P. They then give this form to their payer.
- It’s important for anyone who had an unexpected tax bill or a penalty when they filed this year to do a checkup.
- It’s also an important step for those who made withholding adjustments in 2018 or had a major life change.
- The new Tax Withholding Estimator makes it easier to enter wages and withholding for each job held by the taxpayer and their spouse.
- At the end of the process, the tool makes specific withholding recommendations for each job and spouse. It also clearly explains what the taxpayer should do next.
- Those most likely to owe tax because they’ve had too little tax withheld include:
- Those who itemized in the past but now take the increased standard deduction.
- Two-wage-earner households.
- Employees with nonwage sources of income.
- Those with complex tax situations.