by Christopher Popp, CPA, MST
The IRS has launched a new and improved Tax Withholding Estimator which can be found here https://www.irs.gov/individuals/tax-withholding-estimator. The new estimator incorporates the changes from the redesigned Form W-4. The IRS urges everyone to see if they need to adjust their withholding by using the Tax Withholding Estimator to perform a Paycheck Checkup. If an adjustment is needed, the Tax Withholding Estimator gives specific recommendations on how to fill out their employer’s online Form W-4 or provides the PDF form with key parts filled out.

Beginning in 2020, income tax withholding is no longer based on an employee’s marital status and withholding allowances, tied to the value of the personal exemption. Instead, income tax withholding is generally based on the worker’s expected filing status and standard deduction for the year. In addition, workers can choose to have itemized deductions, the Child Tax Credit and other tax benefits reflected in their withholding for the year.

The estimator allows users to choose the refund amount they prefer from a range of different refund amounts to help workers more effectively adjust their withholding. The exact refund range displayed is customized based on the tax information entered by that user. Based on the refund amount selected, the Tax Withholding Estimator will give the worker specific recommendations on how to fill out their W-4. This new option allows users who seek either larger refunds at the end of the year or more money on their paychecks throughout the year to have just the right amount withheld to meet their preference.

The new Tax Withholding Estimator also features numerous other enhancements, including one allowing someone who expects to receive a bonus to indicate whether tax will be withheld. Other improvements added, include mobile-friendly design, handling of pension income, Social Security benefits and self-employment tax.