WASHINGTON The IRS encourages taxpayers to use the IRS Tax Withholding Estimator to ensure they’re withholding the correct amount of tax from their pay in 2024. ​

This digital tool provides workers, self-employed individuals and retirees with wage income a user-friendly resource to effectively adjust the amount of income tax withheld from their wages. 

The Tax Withholding Estimator will help taxpayers avoid unwanted results in 2024 if the refund for their 2023 return was too large, too small or if they received a surprise tax amount due. 

Benefits of using the Estimator

For employed individuals, withholding refers to the federal income tax amount deducted from their paycheck. Taxpayers can use the Tax Withholding Estimator's findings to decide whether they should fill out a new Form W-4 and give it to their employer. This process can, for instance: 

Ensure the correct tax amount is withheld, preventing a surprise tax bill or penalty during tax season, and
Decide whether to reduce upfront tax withholding, increasing take-home pay and potentially reducing any tax refund at the end of the tax year. 
When should taxpayers use this tool?

The IRS suggests taxpayers review their withholding at least once annually. For anyone who’s recently completed their 2023 return, now is an ideal time to do so. It's also wise to use this tool after significant life events like marriage, divorce, buying a home or having a child. 

When using the withholding calculator taxpayers should consider all forms of income, including part-time work, side jobs or the sale of goods or services commonly reported on Form 1099-K.

What records are needed?

The Tax Withholding Estimator’s results are only as accurate as the information entered. To help prepare, the IRS recommends taxpayers gather: 

Their most recent pay statements, and if married, for their spouse,
Information for other sources of income, and
Their most recent income tax return in 2023, if possible. 
While the Tax Withholding Estimator works for most taxpayers, people with more complex tax situations should instead use the instructions in Publication 505, Tax Withholding and Estimated Tax. This includes taxpayers who owe alternative minimum tax or certain other taxes, and people with long-term capital gains or qualified dividends. 

Additional information

Tax Withholding Estimator FAQs

Paycheck Checkup

"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.  
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA;  Janice Papais, CPA

Both your individual tax return AND first quarter estimated tax payment are due. Here is what you need to know.​

First quarter due date: Monday, April 15, 2024

The estimated tax payment rule
You are required to withhold or prepay throughout the 2024 tax year at least 90 percent of your 2024 total tax bill, or 100 percent of your 2023 federal tax bill.* A quick look at your 2023 tax return and a projection of your 2024 tax obligation can help determine if a quarterly payment might be necessary in addition to what is being withheld from any paychecks.

Things to consider

• Underpayment penalty. If you do not have proper tax withholdings throughout the year, you could be subject to an underpayment penalty. A quick payment at the end of the year may not be enough to avoid the penalty.
• W-2 withholdings have special treatment. A W-2 withholding payment can be made at any time during the year and be treated as if it was made throughout the year. If you do not have enough to pay the estimated quarterly payment now, you may be able to adjust your W-2 wage withholdings to make up the difference.
• Self-employed. In addition to paying income taxes, self-employed workers must also pay Social Security and Medicare taxes. Creating and funding a savings account for this purpose can help avoid the cash flow hit each quarter to pay your estimated taxes.
• Use your refund. An alternative option to pay your first quarter estimated tax is to apply some or all of your tax refund.
• Pay more in the first quarter. By paying a little more than necessary in the first quarter, you can be in a position to adjust future estimated tax payments downward later this year if your tax obligation trends lower than you originally thought.
• Not sure if you need to make a quarterly payment? Take a quick look at your tax return to see the amount of tax you paid last year. Divide this amount by the number of paychecks you receive each year and compare to your most recent paycheck. Is enough being withheld from each paycheck? Talk to your employer if you decide you need to adjust your withholdings to cover next year's tax bill.


*If your income is more than $150,000 ($75,000 if married filing separate), you must pay 110 percent of your 2023 tax obligation to avoid an underpayment penalty on your 2024 tax return.


"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.  
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA;  Janice Papais, CPA

A tax credit is an amount taxpayers claim on their tax return generally to reduce their income tax. Eligible taxpayers can use them to potentially reduce their tax bill and increase their refund.

Refundable vs. nonrefundable tax credits

Some tax credits are refundable. If a taxpayer's tax bill is less than the amount of a refundable credit, they can get the difference back in their refund. Some taxpayers who aren't required to file may still want to do so to claim refundable tax credits. Not all tax credits are refundable, however. For nonrefundable tax credits, once a taxpayer's liability is zero, the taxpayer won't get any leftover amount back as a refund.

There are a wide range of tax credits, and the amount and types available can vary by tax year. Taxpayers should carefully review current tax credits when preparing their federal tax return.

Earned Income Tax Credit

One refundable tax credit for moderate- and low-income taxpayers is the Earned Income Tax Credit (EITC). The IRS estimates four out of five eligible workers claim the EITC, which means millions of taxpayers are putting EITC dollars to work for them. Unfortunately, there are millions of workers who qualify but don't claim the EITC - missing out on thousands of dollars every year. This includes workers who are:

Grandparents raising their grandchildren.
Native Americans.
Veterans.
Self-employed.
Without a qualifying child.
Recently divorced, unemployed or experienced other changes to their marital, financial or parental status.
Below the filing requirement with earnings.
Not proficient in English.
Living in rural areas.
Receiving certain disability pensions or have children with disabilities.
Taxpayers can find detailed information in Publication 596, Earned Income Credit, or use the EITC Assistant to learn if they're eligible for the tax credit.

Child Tax Credit and Child and Dependent Care Tax Credit

The Child Tax Credit is nonrefundable and reduces the taxpayer's tax liability. To qualify, the child must:

Be a U.S. citizen, U.S. national, or U.S. resident under age 17.
Have a Social Security number.
Be claimed as a dependent on the taxpayer's tax return.
Qualifying children may include foster children or extended family members if they meet other criteria. Dependents not eligible for the Child Tax Credit may qualify a taxpayer for the credit for other dependents.

Taxpayers who paid someone to care for their child, spouse or dependent so they can work, be a full-time student or look for work may be able to reduce their tax by claiming the Child and Dependent Care Credit.

Publication 503, Child and Dependent Care Expenses, has detailed information.

American Opportunity Tax Credit

The American Opportunity Tax Credit is for qualified education expenses paid by or on behalf of an eligible student for the first four years of higher education. It is partially refundable. If the credit reduces the amount of tax a taxpayer owes to zero, they can get a refund of 40% of any remaining amount of the credit, up to $1,000. Taxpayers can get a maximum annual credit of $2,500 per eligible student. The amount of the credit is 100% of the first $2,000 and 25% of the next $2,000 of qualified education expenses a taxpayer paid for each eligible student.

To claim the full credit, a taxpayer's income must be $80,000 or less ($160,000 or less for married filing jointly). The credit phases out entirely for taxpayers with income over $90,000 ($180,000 for joint filers).

Publication 970, Tax Benefits for Education, has detailed information.

Other tax credits

There are many other tax credits for which a taxpayer may be eligible. Taxpayers can review the credits and deductions page on IRS.gov to see which credits they may be able to claim, including:

Family and Dependent Credits
Income and Savings Credits
Homeowner Credits
Electric Vehicle Credits
Health Care Credits
Interactive Tax Assistant can help with tax credit questions

The Interactive Tax Assistant is a tool that provides answers to many common tax law questions based on an individual's specific circumstances. User information is anonymous, and the system discards it when the user exits a topic. The assistant uses information to answer taxpayer questions and won't share or store it, nor can it identify individuals. It can help taxpayers with these tax credit-related questions:

Am I Eligible to Claim an Education Credit?
Does My Child/Dependent Qualify for the Child Tax Credit or the Credit for Other Dependents? 
Am I Eligible to Claim the Premium Tax Credit?
Am I Eligible to Claim the Child and Dependent Care Credit?
Do I Qualify for the Credit for the Elderly or Disabled?
Do I Qualify for the Retirement Savings Contributions Credit?
Am I Eligible to Claim a Credit for Adopting a Child or to Exclude Employer-Provided Adoption Benefits From My Employer?
Am I Eligible to Claim the Foreign Tax Credit?
Do I Need to Repay the First-Time Homebuyer Credit?
Taxpayers can find more information about refundable credits and general filing information from:

IRS Free File
A trusted tax professional

"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.  
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA;  Janice Papais, CPA

Beginning In April a number of IRS notices began hitting mailboxes. Unfortunately, the notices are coming in cold, as the IRS is turning on mailing their notices after a long time of being turned off. Their process is creating a lot of undue alarm.​

Example: A small business, current in their tax payments, receives a right to levy asset notice. In other words, pay this tax, interest and penalties or we will have the immediate right to take your assets and keep you from leaving the country. Typically a number of notices are sent before the levy notice, but the levy notice is the first notice received. Even worse, the cause of the problem was the IRS incorrectly applying their tax payment to tax year 2024 instead of 2023.

Example: An individual receives a notice of the IRS assigning their account to a collection agency. In reality, the taxpayer paid their tax and was waiting for the IRS to clarify what, if any, interest was due on their late payment. No response was ever sent by the IRS.

What is happening
The IRS turned its notice system back on after a long hiatus during the pandemic. Unfortunately, it appears no review or adjustments were made before the notices were turned back on. So,

• There was no correspondence back from taxpayers to clear up errors over this time period. These are errors the taxpayer did not know about because notices were turned off.
• The letter cycle clock never stopped. This means instead of getting the next notice in the series, you might receive the fourth or fifth letter in a series.

To make matters worse
In the first example, the IRS representative could see the payment, see it was erroneously applied to next year’s, as yet unfiled, tax return, but the IRS representative was not authorized to correct the error. After calling the department with authorization, the accountant learned the ability to transfer payments was disabled for up to 30 days.

Even worse, just because the error is now known, that communication does not necessarily get passed to the collections (levy ) group. So the levy activity may still be going on, even though the error (theoretically) is now known.
And these notices were mailed in April, right in the middle of tax filing season.

What to do
If you receive a notice, don’t panic, but don’t ignore it.
Call for help in order to respond to the IRS in a timely manner. This almost always means 30 days, so it can generally be handled right after the upcoming tax filing deadline.
Since little review appears to be done on many of these open tax cases, that missing step will typically be your first step to help clarifying and fixing the problem.


"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.  
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA;  Janice Papais, CPA