The next tax season seems far away, but this is actually the perfect time for taxpayers to review their withholding and estimated tax payments. Because federal taxes are pay-as-you-go, it’s important for taxpayers to withhold enough from their paychecks or pay enough in estimated tax. If they don’t, they risk being charged a penalty.
Adjust tax withholding
For employees, withholding is the amount of federal income tax withheld from their paycheck. The amount of income tax an employer withholds from an employee’s regular pay depends on two things:
- The amount they earn.
- The information they give their employer on Form W–4.
All taxpayers should review their federal withholding each year to make sure they’re not having too little or too much tax withheld.
Individuals 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 withholding recommendations to help aim for their desired refund amount when they file next year.
Taxpayers can check with their employer to update their withholding or submit a new Form W-4, Employee’s Withholding Certificate.
Make estimated payments
Taxpayers may need to make quarterly estimated tax payments in a few situations:
- If the amount of income tax withheld from a taxpayer’s salary or pension isn’t enough.
- If they receive income such as interest, dividends, alimony, self-employment income, capital gains, prizes and awards.
- If they are self-employed.
Estimated tax payments are due from individual taxpayers on April 15, June 15, September 15 and January 17. The fastest and easiest way to make estimated tax payments is using Direct Pay or the Electronic Federal Tax Payment System. Taxpayers can visit IRS.gov for other payment options.
This article was published with permission from the IRS.