Coming in time to help anyone doing tax planning for the final few months of 2019, the IRS has launched the new Tax Withholding Estimator. It is an expanded, mobile-friendly online tool designed to make it easier for everyone to have the right amount of tax withheld during the year.
The Tax Withholding Estimator replaces the Withholding Calculator. The new Tax Withholding Estimator 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 IRS took feedback and concerns of taxpayers and tax professionals to develop the Tax Withholding Estimator, which offers:
- 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 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 Social Security benefits
The Tax Withholding Estimator also 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.
The IRS urges 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.
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.
The South Carolina Department of Revenue recently announced it is planning to adjust its withholding tables based on upcoming W-4 revisions, along with advice and warnings about over-withholding.
To get started with the IRS’s new tool, check out the Tax Withholding Estimator on IRS.gov.