Now is the perfect time to review your tax withholding and payments to avoid a surprise when filing next year.
An adjustment or two made now may boost take home pay or allow you to pay more in the last quarter of 2020 to avoid a surprise tax bill.
Some things to consider according to the IRS that will affect taxes owed in 2020 include:
- Coronavirus tax relief – Tax help for taxpayers, businesses, tax-exempt organizations and others – including health plans – affected by coronavirus (COVID-19).
- Disasters such as wildfires and hurricanes – Special tax law provisions may help taxpayers and businesses recover financially from the impact of a disaster, especially when the federal government declares their location to be a major disaster area.
- Unemployment compensation – Millions of Americans got taxable unemployment compensation, many of them for the first time. Taxes can be withheld from their benefits.
- Job loss – IRS Publication 4128, Tax Impact of Job Loss, explains how this unfortunate circumstance can create new tax issues.
- Workers moving into the gig economy due to the pandemic – IRS advises people earning income in the gig economy to consider quarterly estimated tax payments to stay current.
- Life changes such as marriage or childbirth – Getting married or having a child are just a couple of life events that can affect your refund or how much you owe.
Try the tax Withholding Estimator tool to make it easier to have the right amount of tax withheld during the year. 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 2020, had a major life change or were adversely affected by the pandemic.
The tool offers workers, as well as retirees, self-employed individuals and other taxpayers, a more user-friendly step-by-step tool for effectively tailoring the amount of income tax they have withheld from wages and pension payments.
The tax withholding estimator has several key features for ease of use:
- The ability to more effectively target at the time of filing either a tax due amount close to zero or a refund amount.
- A progress tracker to help users see how much more information they need to input.
- Enhanced tips and links to help to 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.
In addition, the new 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.
If you have any questions regarding your tax withholding, contact a member of the Crosslin tax team at 615-320-5500. We are here to help!
