By Payroll and Entitlements Editorial Staff
The IRS has strongly urged retirees to use its Tax Withholding Estimator tool for help with calculating projected tax liability and withholding. In fact, a retiree can use the estimator to enter any pension income or Social Security benefits received during the year. Subsequently, the tool automatically calculates the taxable portion and incorporates it into an overall estimate of projected tax liability and withholding for the year. If a withholding change is required, the retiree can choose a tax due of close to zero or a refund amount. The estimator will then link to Form W-4P, Withholding Certificate for Pension or Annuity Payments, and offer the retiree a specific withholding recommendation based on the option selected. In addition, the tool also gives instructions on how to fill in each line of Form W-4P.
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