By Payroll and Entitlements Editorial Staff
The IRS informed taxpayers that the new Tax Withholding Estimator tool would include a feature designed to make it simpler for employees who received self-employment income to accurately estimate the right amount of income tax. The estimator would be an expanded, mobile-friendly online tool which offers self-employed individuals, workers, retirees and other taxpayers a more dynamic and user-friendly way to calculate the amount of income tax they want to have withheld from either wages or pension payments. Further, the IRS encouraged the taxpayers to use the estimator to take a Paycheck Checkup to make sure they avoid a surprise during filing, especially anyone who faced an unexpected tax bill or a penalty when they filed earlier this year.
Moreover, the estimator would allow a user to enter any self-employment income, including income from side gigs or the sharing economy, in addition to wages or pensions. The user would then be alerted if they qualify for several special tax benefits, including the self-employment health insurance deduction or the deduction for contributions to a Simplified Employee Pension, Savings Incentive Match Plans for Employees or other qualified retirement plan. Thereafter, the estimator would automatically calculate the self-employment tax and the self-employment tax deduction and incorporates these into its overall tax liability estimate. The estimator would then automatically link to the appropriate withholding form, which for employees goes to Form W-4, Employee's Withholding Allowance Certificate, which they can then fill out and submit to their employer. Similarly, for pension recipients, the link is to Form W-4P, Withholding Certificate for Pension or Annuity Payments, which should be submitted to the pension payor. Finally, the IRS has sponsored a free two-hour webinar on the Tax Withholding Estimator, which will take place on Thursday, September 19 at 2:00 p.m. Eastern Time. (IRS News Release, IR-2019-149, September 4, 2019.)
Interested in submitting an article?
Submit your information to us today!Learn More