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.