Check your federal tax being withheld
The IRS is encouraging all taxpayers to review their federal withholding. This will help to make sure you are not having too little or too much federal tax withheld.
Don’t wait until it’s too late in the year. Waiting makes your adjust larger since you will have a shorter period to correct your total amount of federal withholding for the year. By making the adjustment earlier in the year you will be able to make a smaller adjustment and won’t notice the change nearly as much.
Unfortunately, there are taxpayers who never check their federal withholding and then are surprised when they file their tax returns.
Taxpayers should review their withholding annually.
The IRS provides a tool called the IRS Tax Withholding Estimator to check your federal tax withheld. The helps to provide workers, retirees and self-employed people with a step-by step method to determine if they should adjust their federal taxes being withheld.
It is harder to determine the correct amount of withholding for certain people. This includes people:
- who are part of a two-income family
- working two or more jobs or who only work for part of a year
- with children who claim credits such as the child tax credit and education credit
- with older dependents, including children age 17 or older
- who itemized deductions on their 2019 tax return
- with large refunds or large tax liabilities for 2019
- who received unemployment at any time during the year
The IRS Tax Withholding Estimator will enable you to review your withholding and calculate whether you should complete a new Form W-4.
Additionally, it will help you determine what information you should put on your new Form W-4.
The Estimator can save you time because it does all the worksheet calculations. Having your most recent pay statements, information for other income sources and the most recent income tax return will help to figure out your correct withholding.
If you need to make an adjustment you should complete a new Form W-4 and submit it to your employer as soon as possible. If you need to adjust the withholding from your retirement distribution, submit the new Form W-4 to the retirement company.
If you use a tax professional, they may be able to help you calculate your withholding and determine the amount of adjustment required.
Checking your withholding now will better enable you to know what to expect when you are filing your tax return. This will help you to avoid being surprised and unnecessary stress at tax time.
David Zubler is a tax accountant and Enrolled Agent representing clients before the IRS with over 25 years of tax experience. He is the author of four tax books and is the founder and president of Your Tax Care. The company provides business and tax education to the public at its website, YourTaxCare.com. David can also be contacted by email at email@example.com