The IRS encourages all taxpayers to review their federal withholding at least once a year to make sure they're not having too little or too much tax withheld.
Taxpayers whose employers withhold federal income tax from their paycheck can use the IRS Tax Withholding Estimator to help decide if they should make a change to their withholding. This online tool guides users, step-by-step through the process of checking their withholding, and provides recommendations to help aim for the withholding amount that’s right for them. Taxpayers should check with their employer to update their withholding or submit a new Form W-4, Employee's Withholding Certificate. Adjustments to withholding Individuals should generally increase withholding if they hold more than one job at a time or have income from sources not subject to withholding. If they don't make any changes, they will likely owe additional tax and possibly penalties when filing their tax return. Individuals should generally decrease their withholding if they qualify for income tax credits or deductions other than the basic standard deduction. Either way, those who need to adjust their withholding must submit the new W-4 information to their employer as soon as possible since withholding occurs throughout the year. Individuals who should check their withholding include those:
Reasons to use the Tax Withholding Estimator The IRS Tax Withholding Estimator can help taxpayers:
Individuals who should not use the Tax Withholding Estimator are those: Who have a pension but not a job. Form W-4P, Withholding Certificate for Pension or Annuity Payments, should be used to estimate this tax withholding. Who have nonresident alien status. These individuals should use Notice 1392, Supplemental Form W-4 Instructions for Nonresident Aliens. Whose tax situation is complex. This includes alternative minimum tax, long-term capital gains or qualified dividends. Taxpayers should prepare before using the Tax Withholding Estimator by having pay statements for all jobs, information for other income sources and their most recent income tax return. The tool does not ask for sensitive information such as name, Social Security number, address, or bank account numbers. "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
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September 2023
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