The IRS has urged taxpayers to review their tax withholding to avoid any big surprises, such as a big refund or a balance due, during the tax time in 2023 and avail benefits from any changes arising due to marriage, divorce, new tax law, a new child or home purchase and adjust their tax withholding accordingly.
The IRS has announced that, Tax Withholding Estimator also available in Spanish, can help workers, retirees, self-employed individuals and other taxpayers for effectively tailoring the amount of income tax they should have withheld from wages and pension payments based on their complete set of facts and circumstances. In other cases, it can 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. However, when taxpayers withhold too much, it typically results in a refund. The IRS has urged taxpayers to keep the following facts regarding refunds in mind:
- Proper withholding adjustments help people boost take home pay rather than be over withheld and get it back as a tax refund.
- Most refunds may be issued in 21 days or less from an error-free and paperless tax return, but many take longer.
- Refunds should not be relied upon, for big purchases.
- Direct Deposit is the easiest and most convenient way to get a refund.
- Paper return processing delays stemming from the pandemic are six months or more.
Some unforeseen life events can be a trigger to make withholding adjustments. They include:
- Coronavirus tax relief offers help to taxpayers, businesses, tax-exempt organizations and others affected by the coronavirus (COVID-19).
- Special tax law provisions may help taxpayers and businesses recover financially from the impact of a disaster like wildfires and hurricanes, especially when the federal government declares their location a major disaster area.
- Loss of a job is an unfortunate circumstance which can create new tax issues.
- The IRS advises people earning income in the gig economy to consider estimated tax payments to avoid a balance due or penalties when they file.