Source; IRS Issue Number: Tax Tip 2023-21
A few minutes spent reviewing income tax withholding early in the year helps set a taxpayer up for success all year long. The Tax Withholding Estimator on IRS.gov makes it easy to figure out how much to withhold.
This online tool helps employees withhold the correct amount of tax from their wages. It also helps self-employed people who have wage income estimate their quarterly tax payments.
The Tax Withholding Estimator does not ask for personally identifiable information, such as name, Social Security number, address and bank account numbers. The IRS doesn’t save or record the information users enter in the Estimator.
Why use the Tax Withholding Estimator
Using this tool to estimate tax withholding can help taxpayers avoid unpleasant surprises. Having too little withheld can result in a tax bill or even a penalty at tax time. Having too much withheld may result in a projected refund, which could mean less money in the taxpayer’s pocket during the year. The Tax Withholding Estimator can help taxpayers decide how much to withhold to get to a balance of zero or to a desired refund amount.
Taxpayers can use the results from the Tax Withholding Estimator to decide if they should:
- Complete a new Form W-4, Employee’s Withholding Allowance Certificate and submit it to their employer, or
- Make an additional estimated tax payment to the IRS.
Before using the tool, taxpayers may want to gather a few documents, including:
- Pay stubs for all jobs. If the taxpayer married filing jointly, they would also need their spouses’ pay stubs.
- Forms W-2 from employers to estimate their annual income.
- Forms 1099 from banks, issuing agencies and other payers including unemployment compensation, dividends, distributions from a pension, annuity or retirement plan.
- Form 1099-K, 1099-MISC, W-2 or other income statement for workers in the gig economy.
- Form 1099-INT for interest received.
- Other income documents and records of virtual currency transactions.
People do not need these documents use the tool but having them will help taxpayers estimate 2023 income and answer other questions asked during the process. The Tax Withholding Estimator results will only be as accurate as the information the taxpayer enters.
The Tax Withholding Estimator isn’t for taxpayers who
- Only have pension income – They can read more about pension and annuity withholding on IRS.gov.
- Have more complex tax situations – This includes taxpayers who owe certain taxes such as the alternative minimum tax and people with long-term capital gains or qualified dividends.
Publication 505, Tax Withholding and Estimated Tax
Share this tip on social media — #IRSTaxTip: This IRS online tool simplifies estimating 2023 tax withholding. http://ow.ly/wVRc50MUvu4
End of IRS Publication
Zaher Fallahi, Tax CPA, and Tax Defense Attorney, assists taxpayers nationwide with their tax preparation, cryptocurrency tax, foreign gifts, undisclosed foreign bank accounts, and other international tax matters. Tel.: (310) 719-1040, (714) 546-4272 and (877) 687-7558 toll free nationwide. Websites: zflegal.com and zfcpa.com E-mail [email protected]