As the End-of-Year Nears – Now is the Time to Take a Closer Look at Your Tax Withholdings
Life brings constant changes to individual financial situations. Events like marriage, divorce, a new child or home purchase can all be reasons to adjust withholding. So the Internal Revenue Service reminds taxpayers today that the last quarter of 2021 is a good time to check withholding.
The convenient Tax Withholding Estimator, also available in Spanish, will help taxpayers determine if they have too much withheld and how to make an adjustment to put more cash into their own pocket now. In other cases, it will help taxpayers see that they should withhold more or make an estimated tax payment to avoid a tax bill when they file their tax return next year.
Items that may affect 2021 taxes
Things to consider when adjusting withholding for 2021 are:
Coronavirus tax relief – Tax help for taxpayers, businesses, tax-exempt organizations and others – including health plans – affected by coronavirus (COVID-19).
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 to be a major disaster area.
Job loss – IRS Publication 4128, Tax Impact of Job Loss (.pdf), explains how this unfortunate circumstance can create new tax issues.
Workers moving into the gig economy due to the pandemic – IRS advises people earning income in the gig economy to consider estimated tax payments to avoid a balance or penalties when they file.
Life changes such as marriage or childbirth – Getting married or having a child are just a couple of life events that can affect your refund or how much you owe.
Pay as you go
Taxes are generally paid throughout the year whether from salary withholding, quarterly estimated tax payments or a combination of both. About 70% of taxpayers, however, over withhold their taxes every year, which typically results in a refund. The average refund in 2021 was more than $2,700.
Taxpayers can pay online, by phone or from the IRS2Go app. They can schedule payments for future dates, which can be useful during filing season, for payment plan payments or for estimated tax payments.
Taxpayers can also log into their IRS.gov/account to view the amount they owe, their payment plan details and options, their payment history (up to 5 years), any scheduled or pending payments, and key tax return information from their most recent tax return.
Tax Withholding Estimator
The IRS Tax Withholding Estimator makes it easier for everyone to have the right amount of tax withheld. This is especially important for anyone who faced an unexpected tax bill or a penalty when they filed this year, or whose jobs or tax circumstances have changed during the year.
The tool offers workers, as well as retirees, self-employed individuals and other taxpayers, a user-friendly, step-by-step tool for effectively tailoring the amount of income tax they have withheld from wages and pension payments.
For more information about taxes, estimated taxes and tax withholding, see Tax Withholding at IRS.gov. If you need more personalized help with checking up on your Tax Withholdings or completing your payroll forms properly, feel free to contact me for more information.
As a Tax Strategist, Consultant and Educator, I’ve been helping other Entrepreneurs (and Individuals) around the U.S. just like you, save thousands of their hard-earned tax dollars, increased their refunds, and solve multiple tax problems. Beyond taxes, I am your “GPS” to starting and growing your own business. Be sure to download my ebook Taxes & The New (or “Early-Stage”) Entrepreneur: What You Need to Know