September 30, 2019
The IRS announced on August 6, 2019 that it launched its new
Tax Withholding Estimator
, an expanded, mobile-friendly online tool. The Tax Withholding Estimator is designed to make it easier for taxpayers to have the right amount of tax withheld from their paychecks or that they are making the right estimated tax payments.
Checking your withholding can help protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time next year. Or, with the average refund topping $2,800, you may prefer to have less tax withheld up front and receive more in your paychecks.
User Friendly Features
The Tax Withholding Estimator offers user-friendly features including:
- Plain language throughout the tool to improve comprehension.
- The ability to more effectively target at the time of filing either a tax due amount close to zero or a refund amount.
- A new progress tracker to help users see how much more information they need to input.
- The ability to move back and forth through the steps, correct previous entries and skip questions that don’t apply.
- Enhanced tips and links to help the user quickly determine if they qualify for various tax credits and deductions.
- Self-employment tax for a user who has self-employment income in addition to wages or pensions.
- Automatic calculation of the taxable portion of any Social Security benefits.
- A mobile-friendly design.
In addition, the Tax Withholding Estimator makes it easier to enter wages and withholding for each job held by the taxpayer and their spouse, as well as separately entering pensions and other sources of income. At the end of the process, the tool makes specific withholding recommendations for each job and each spouse and clearly explains what the taxpayer should do next.
Tips for Using This Program
The Tax Withholding Estimator will ask you to estimate values of your 2019 income, the number of children you will claim for the Child Tax Credit and Earned Income Tax Credit, and other items that will affect your 2019 taxes. You will need to have your most recent pay stubs and income tax return to complete the questionnaire.
If you are an employee, the Tax Withholding Estimator helps you determine whether you need to give your employer a new
Form W-4, Employee's Withholding Allowance Certificate
. You can use your results to help fill out the form and adjust your income tax withholding. If you receive pension income, you can use the results from the estimator to complete a
and give it to your payer.
The Tax Withholding Estimator works for most taxpayers. People with more complex tax situations should use the instructions in
Publication 505, Tax Withholding and Estimated Tax
. This includes taxpayers who owe alternative minimum tax or certain other taxes, and people with long-term capital gains or qualified dividends.
The Tax Withholding Estimator will help anyone doing tax planning for the last few months of 2019. Like last year, the IRS encourages everyone to do a Paycheck Checkup and review their withholding for 2019. This is especially important for anyone who faced an unexpected tax bill or a penalty when they filed this year. It’s also an important step for those who made withholding adjustments in 2018 or had a major life change such as a marriage, divorce, home purchase, new job, retirement, birth, adoption or tax law changes can affect your taxes.
Those most at risk of having too little tax withheld include those who itemized in the past but now take the increased standard deduction, as well as two-wage-earner households, employees with nonwage sources of income and those with complex tax situations.
Source: IRS Press Release. IRS Launches New Tax Withholding Estimator; Redesigned Online Tool Makes it Easier to do a Paycheck Checkup. August 6, 2019.
Martin C. McCarthy, CPA, CCIFP
McCarthy & Company, PC
Disclaimer: This alert is for informational purposes only and does not constitute professional advice. Information contained in this communication is not intended or written to be used as tax advice, and cannot be used by the recipient to avoid penalties that may be imposed under the Internal Revenue Code. We strongly advise you to seek professional assistance with respect to your specific issue(s).