Employed people are reminded by the Internal Revenue Service to utilise the Tax Withholding Estimator right now to make changes to their withholding for 2023. Marriage, divorce, the birth of a kid, or a child moving out on their own can all affect a person’s tax status at some point. They might be able to avoid having to pay quarterly anticipated tax if they check now and make any required modifications early in the year.
With the use of the Tax Withholding Estimator online tool, taxpayers may determine if they are eligible for a refund or whether they must pay the IRS directly to avoid owing money and incurring penalties the next year.
Income taxes are pay-as-you-go and are often paid throughout the year as income is received through withholding from wages, pension payments, Social Security benefits, or certain other government payments.
Taxpayers may need to make quarterly anticipated tax payments in order to avoid owing a balance when they file if they have a second job, non-wage income from self-employment, annuities, the gig economy, or digital assets.
Also, certain financial transactions, particularly those that happen at the end of the year, may have unanticipated tax repercussions. Examples include year-end and holiday bonuses, dividends from equities, capital gain distributions from mutual funds and stocks, bonds, digital currency, real estate or other property sold at a profit.
Tax Withholding Estimator
Wage earners may check their tax withholding amounts by using the Tax Withholding Estimator, which is also accessible in Spanish. The estimate may be used by taxpayers to modify the amount of withholding they are required to make and to submit a revised Form W-4, Employee’s Withholding Certificate, to their employer. The programme gives wage earners step-by-step assistance for customising the amount of income tax that should have been deducted from their pay checks.
Make a tax payment
Using IRS Direct Pay or the Treasury Department’s Electronic Federal Tax Payment System to make an anticipated tax payment electronically is the quickest and simplest option (EFTPS). Pay Online has details about additional payment methods. Make sure the check is written out to “United States Treasury” if paying by check.
Taxes in 2023 might be impacted by further factors.
A need to alter withholding may arise from some unanticipated life occurrences. These resources will assist taxpayers in understanding how to alter their taxes considering various circumstances:
- A few pointers for utilising the IRS Tax Withholding Estimator.
- Using the Tax Withholding Estimator results: what to do.
- Updates, associated documents, and filing instructions for Form W-4, Employee’s Withholding Certificate, are provided here.
- Tax relief from the coronavirus for individuals, corporations, tax-exempt organisations, and others, such as health plans (COVID-19).
- Special tax law rules that apply when a location is identified by the federal government as being in a significant disaster region are known as Disaster Assistance and Emergency Relief for Individuals and Businesses.
- The IRS Publication 4128, Tax Impact of Job Loss(PDF available on irs.gov, describes how this unpleasant event might result in new tax problems.
- People making money in the gig economy provide advice to workers migrating into it because of the epidemic.
- Publication 505, Tax Withholding and Estimated Tax, contains extra information, spreadsheets, and examples that may be useful to persons in unique circumstances.
(Source: This article was originally published by irs.gov/newsroom IR-2023-10 on January 19, 2023.)