Tuesday Tax Tip - Review Your Fed W/H
All taxpayers should review their federal withholding each year to make sure they're not having too little or too much tax withheld. Doing this now can help protect against facing an unexpected tax bill or penalty in 2023.The sooner taxpayers check their withholding, the easier it is to get the right amount of tax withheld.
Taxpayers whose employers withhold federal income tax from their paycheck can use the IRS Tax Withholding Estimator to help decide if they should make a change to their withholding. This online tool guides users through the process of checking their withholding to help determine the right amount to withhold for their personal situation. Taxpayers can check with their employer to update their withholding or submit a new Form W-4, Employee's Withholding Certificate.
This IRS Tax Withholding Estimator can also be used for self-employed individuals. Use it the same way as you would if you were employed by an employer, but you will need to answer "Yes" to the question "Do you (or will you) have a job that regularly withholds federal income taxes from your paychecks?". Click Next and select "Salary", "All Year", "Once a Month" and enter the last date of the month for the current year. Enter $1 in both boxes. It will ask to enter federal taxes paid if any, you could enter if you paid any or enter zero. Check the "Self-employment net income" box (See example-'Using your most recent paystub' below).
Click Next. And select or leave the rest of the screens without checking any boxes and click Next. Or you can select the deductions and credits as you desire to get a better picture of your withholding estimate. (See example-'sample-IRS-estimator' for deductions and credits)
Why can I use this estimator if I am self-employed? You ask...well because it's just that, an estimator you can put in different scenarios to see "What Ifs". Here are some examples to help you better navigate the IRS Estimator.
Your results will determine if you should change your W-4 withholding. Click here for the W-4 form, it can be filled out online, print it and sign it and give it to your employer.