Tag Archives: paycheck check up

Tax Updates Early May

IRS Updates May 2023 by Paul Davis

Better Late Than Later

The IRS is urging taxpayers who missed the April 18 tax-filing deadline to file as soon as possible. Those who owe taxes should file quickly to minimize penalties and interest, which can accrue over time. For those who should receive a refund, there is no late-filing penalty. Some taxpayers automatically qualify for extra time to file and pay, including disaster victims, military members serving in a combat zone and support personnel, and taxpayers outside the United States. There are options for taxpayers struggling to pay their tax bill. 

May 15 Deadline for Tax-Exempt

The IRS reminds tax-exempt organizations that their filing deadline is May 15, 2023. Those operating on a calendar-year basis must file a return by this date. Form 990-series (information returns such as Form 990, 990-EZ, 990-PF), Forms 990-N, 990-T, and Form 4720 must be e-filed. Those requiring additional time to file beyond the May 15 deadline can request a six-month automatic extension, however this does not extend the time for paying any taxes due. Online Workshops are also available to help exempt organizations comply with their filing requirements. 

Tax Relief for Indiana Victims

Storm victims in Indiana now have until July 31, 2023, to file various federal individual and business tax returns and make tax payments. This relief applies to any area designated by the Federal Emergency Management Agency (FEMA) as a result of tornadoes, severe storms, and wind that occurred on March 31 and April 1. Taxpayers and businesses in Allen, Benton, Clinton, Grant, Howard, Johnson, Lake, Monroe, Morgan, Owen, Sullivan, and White counties qualify, in addition to any other areas later designated. This relief is automatic, and there is no need to contact the IRS unless an affected taxpayer incorrectly receives a late filing or late payment penalty notice. As always, an updated list of eligible localities is available.

Put Withholding Estimator to Work

The IRS suggests taxpayers get a head start on the 2024 filing season by using the Tax Withholding Estimator to help update the amount of tax to have taken out of their 2023 pay. It is especially useful after a major life change such as marriage, divorce, birth or adoption of a child, a home purchase, or a significant change in income. Those who received a large refund or owed a lot of tax this year would also benefit from using the estimator. To receive the most accurate estimate, have on hand recent pay statements (for both spouses if married), other income sources, and the most recent income tax return.

Tax Updates Mid July

ETAAC Submits Report to Congress

The Electronic Tax Administration Advisory Committee (ETAAC) has released its annual report to Congress, featuring recommendations focused on budget support for the IRS and e-filing enhancements. Their recommendations include providing the IRS with multi-year funding; removing impediments to e-filing with appropriate security features, consent, and acknowledgements; promoting the use of identity protection PIN through a national campaign; and working with states and software providers to improve Payroll and Information Returns. The full report can be accessed at the link.

IRS Nationwide Tax Forum Impending

The IRS Nationwide Tax Forum begins July 19, and the last day of full-access registration is July 14. The virtual event is being held over a five-week period ending August 18. Webinars will be livestreamed, and exhibitors from the Virtual Expo available for interaction during certain hours, with most content available 24 hours a day. Focus groups on a variety of subjects are available, and Forum attendance qualifies as continuing education credits for qualified professionals.

Time For a Paycheck Checkup?

With half the year behind us, it may be a good time for those earning a paycheck to do a “paycheck checkup” to avoid any disappointing tax-time surprises. Taxes are withheld from each paycheck and sent directly to the IRS, with the goal of having all taxes paid by the end of the year. To make sure your employer is withholding the proper amount of tax from your paycheck, employees may use the IRS’ convenient Withholding Estimator. To use the tool, you will need the most recent paystub from all jobs (and those of your spouse, if you file jointly), other income from side jobs or self-employment, and your most recent tax return. With this information, you may instruct your employer to increase or decrease your tax withholding and hopefully come out even at tax time.

 

 

 

Paycheck Checkup for September

Tax Planning – Paycheck Checkup

With the change of seasons and start of the traditional school year, it’s a good time to
review your tax planning, and a Paycheck Checkup is an important part of that.

What is a Paycheck Checkup?

A Paycheck Checkup is a review of your tax withholding. Making sure the proper
amount of tax is being withheld from your paychecks will ensure you have no tax-time
surprises. Income tax is a pay-as-you-go system, and underpaying during the year can
result in taxes owed, and even penalties, when you file your tax return.

How To Do a Paycheck Checkup

The easiest way to do a Paycheck Checkup is to use the IRS’ Tax Withholding
Estimator . The Estimator will use information from a recent pay stub and your latest tax
return to estimate what should be withheld from current paychecks. The Estimator does
not save any of the information, nor does it ask for personally identifying information
such as social security or tax identification numbers.

What If the Withholding Is Wrong?

If you find the incorrect amount is being withheld from your paychecks, you could end
up loaning a lot of money, interest-free, to the government. This means too much is
being withheld, your paychecks are less, and you get a large tax refund. A large refund
might feel like a nice yearly boost, but it’s not the best management of your income.
If too little is being withheld, you could end up owing the IRS for your taxes (and even
penalties, in some cases). This would obviously be an unwelcome situation.

How To Change Withholding

Taxpayers who find their withholding should be changed need to ask their employer for
a Form W-4 (or print one here and submit it to their employer).
Those who have recently gotten married, divorced, had a child, gotten a raise, or begun
a side job should especially do a Paycheck Checkup, and end the year prepared for tax
season.

The Paycheck Checkup

We share IRS updates that frequently remind taxpayers to do a “paycheck checkup,” but what exactly is that, and why is it important?

Pay As You Go

Our income tax system is a “pay as you go” system where taxes are owed as the income is being earned or received (annuities and pensions also count). When beginning a new job, employees fill out a Form W-4, Employee’s Withholding Allowance Certificate indicating their filing status and number of withholding allowances. 

 

Employers then “withhold” a portion of an employee’s income and send it to the IRS. This is usually reflected in each pay stub, and on Form W-2, Wage and Tax Statement that employees receive (from their employers) at the beginning of the year.

If the withholding is incorrect, or there is additional income from other jobs or the sharing economy, taxpayers may end up with an unwelcome tax time surprise.

Who Needs It?

Everyone – even those who did one in 2018, and especially if any tax was owed when filing for 2018 – needs to do a paycheck checkup. Additionally, any time there is a change in income or a major life event, such as getting married or divorced, giving birth to or adopting a child, it’s also time to do a paycheck checkup. 

The IRS has a handy Withholding Calculator to help taxpayers determine appropriate withholding allowances so they can make sure enough is being taken out of their paychecks or other income to cover the tax owed.

Then What?

If you had a 2018 tax bill or if the calculator indicates your withholding is too low, you can easily adjust it. Ask your employer for a new W-4, make the necessary changes, and avoid a 2019 tax bill next year!