Burned by failing to withhold enough? IRS announces new estimator
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On behalf of Pridgeon & Zoss, PLLC | Aug 9, 2019 | IRS
The 2017 Tax Cuts and Jobs Act changed a number of things, eliminating many traditional tax exemptions and raising the standard deduction so that itemizing was much less common. As a result, the IRS recommended that people reconsider their 2018 tax withholdings and offered an online calculator to help.
That calculator, however, was difficult to use and confusing for many taxpayers. Many people therefore failed to perform a withholding checkup and subsequently discovered that they had not withheld enough. They ended up owing taxes unexpectedly.
Therefore, the IRS has attempted to make the process of calculating withholdings easier and more straightforward. And, it has released a new tax withholding estimator to help most workers, the self-employed and retirees calculate the proper withholdings.
“The new estimator takes a new approach and makes it easier for taxpayers to review their withholding,” says the IRS commissioner . “This is part of an ongoing effort by the IRS to improve quality services as we continue to pursue modernization and enhancements of our taxpayer relationships.”
New features in this year’s tax withholding estimator include:
A mobile-friendly design
The use of plain language throughout the tool
The ability to target either zero taxes due or a refund, if desired
A progress tracker to let users know how much more information is needed
The ability to move back and forth, skip questions that don’t apply and correct prior entries
Inclusion of a self-employment tax calculator for taxpayers with self-employment income in addition to wages or pensions
Automatic calculation of the taxable portion of any Social Security income
Improved tax tips and links to help users determine what credits and deductions they may qualify for
Once you’ve finished using the tax withholding estimator, you can complete a new W-4 and file it with your employer to increase or decrease your withholdings.
Keep in mind that the majority of the year is now past, so you may need to increase your withholdings more substantially to achieve the right level before the tax year closes. Also, keep in mind that the effect will last all 12 months of next year unless you readjust.
Even if you weren’t burned by low withholdings last year, consider a withholding checkup. As the IRS reminds us, the average refund tops $2,800, so you may wish to reduce your withholdings and take more in your paycheck.
If you have questions about tax withholdings generally or the effect of failing to withhold enough, contact your tax attorney.
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Pridgeon & Zoss, PLLC , provides legal counsel for clients in Hennepin County, Ramsey County, Dakota County and Washington County, Minnesota, including Twin Cities area communities such as Minneapolis, St. Paul, Bloomington, Brooklyn Park, Burnsville, Eagan, Edina, Minnetonka, Richfield, St. Louis Park, Wayzata, White Bear Lake, Eden Prairie, Woodbury, Golden Valley, Maplewood, Roseville, Mendota Heights and Plymouth. The firm also serves clients in St. Croix County, Wisconsin, including communities such as Hudson and Menomonie.
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