Taxpayers are urged to use the IRS Tax Withholding Estimator to avoid unexpected fees and penalties when filing their taxes. By using this tool, individuals can adjust the amount of income tax withheld from their wages to ensure they are withholding the correct amount. This can help prevent surprise tax bills or penalties when filing taxes the following year. By reviewing the estimator yearly, taxpayers can make necessary adjustments based on changes in their financial situation, such as getting married, buying a home, or having a child. This tool is essential for those who rely on income withholding throughout the tax year to avoid a large tax bill at the end of the year.
Higher-income joint filers who claim zero for withholdings are particularly at risk of owing money when filing their taxes. The IRS Tax Withholding Estimator aims to prevent this scenario by providing taxpayers with an accurate estimate of what they will owe based on the information provided. This tool was launched in 2019 as the IRS sought to improve its service quality and help taxpayers avoid unwanted tax surprises. By using this tool, individuals can reduce their tax refund to increase their take-home pay, allowing them to have more money to spend throughout the year.
To use the IRS Tax Withholding Estimator, taxpayers will need their most recent pay statements as well as information regarding other sources of income and their most recent income tax return. Failing to withhold the proper amount from their income can lead to owing a substantial tax bill when filing their return, especially if they received a pay raise due to inflation. This can result in penalties and interest charges from the IRS, causing an unpleasant surprise for taxpayers. By using the estimator tool, individuals can avoid these potential issues and ensure they are withholding the correct amount from their income.
In addition to the Tax Withholding Estimator, the IRS has also opened up Free File and Direct File pilot programs to help taxpayers avoid extra costs associated with filing their taxes with an accountant. By utilizing these online filing options, individuals can save time and money while ensuring they are accurately completing their tax returns. It is important for taxpayers to take advantage of these resources to avoid potential penalties and fees that may arise from incorrect tax withholding.
Financial experts emphasize the importance of using the IRS Tax Withholding Estimator to avoid unwanted tax surprises and ensure accurate tax withholding throughout the year. By reviewing this tool annually and making necessary adjustments based on changes in financial circumstances, individuals can prevent large tax bills and penalties when filing their taxes. This proactive approach can help taxpayers avoid financial stress and uncertainty related to unexpected tax liabilities, ensuring they are properly managing their tax obligations and maximizing their take-home pay.
