Avoid a surprise next year; review tax withholding now before time runs out

7 de November de 2023by Larson Accounting
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With 2023 rapidly coming to a close, the Internal Revenue Service today encouraged taxpayers to review their tax withholding as soon as possible to avoid a potential surprise when they file their tax return next year.

Although it’s best for taxpayers to verify withholding early in the year, an adjustment made in the final weeks of 2023 could still help to avoid an unexpected result, such as a big refund or a balance due, when filing taxes next year.

With only a few weeks left in the year, the IRS encouraged people who haven’t checked their withholding recently to do it soon so they can make any withholding adjustments needed. The IRS has several ways to help.

Tax Withholding Estimator

The Tax Withholding Estimator, also available in Spanish, can help taxpayers determine if they have too much income tax withheld and how to adjust tax withholding. In other cases, it can help taxpayers see that they should withhold more or make an estimated tax payment to avoid a tax bill when they file their 2023 tax return.

The tool offers workers, retirees, self-employed individuals and other taxpayers a simple-to-use, mobile-friendly way to calculate the correct amount of income tax they should have withheld from wages and pension payments based on their complete set of facts and circumstances.

Taxpayer options to pay as they go

Taxes are generally paid throughout the year. Employers typically withhold income tax from their employees’ salary and pay it to the IRS on the employee’s behalf. However, about 70% of taxpayers withhold too much every year resulting in a refund.

The IRS reminds individuals earning income that’s not subject to withholding, such as income from rental properties, gig economy work or self-employment, to consider making quarterly estimated tax payments to avoid a balance due or penalties when filing.

Taxpayers may send estimated tax payments with Form 1040-ES by mail, or pay online, by phone or from their mobile device using the IRS2Go app. Taxpayers may also make estimated tax payments through their Online Account, where they can also see their payment histories and other tax records. To create an Online Account, go to IRS.gov/account.

Other items may affect 2023 taxes

Common and unforeseen life events can be a trigger to make withholding adjustments. They include:

  • Disasters such as wildfires and hurricanes – Special tax law provisions may help taxpayers and businesses recover financially from the impact of a disaster, especially when the federal government declares their location a major disaster area.

The IRS reminds taxpayers that a refund is not guaranteed. Proper withholding adjustments help people boost take-home pay rather than be over-withheld and get it back as a tax refund.

If eligible, the fastest way to receive a tax refund is by filing electronically and choosing Direct Deposit. IRS issues most refunds within 21 days. While most are issued in 21 days or less from an error-free and paperless tax return, many take longer for different reasons.

Source: IRS-2023-205, Nov. 3, 2023

 

Larson Accounting