People often take up multiple jobs over the summer to clear off a particular debt or other pending bills. While it’s great to earn income from multiple sources, you might lose a significant amount to the withholding tax every employer is compelled to deduct from your salary. Thus, to limit your deductions, the IRS prefers that you complete a Paycheck Checkup so that each of your employers is aware of exactly how much of your salary to withhold for taxes.
Withhold lesser than the required amount, and you will end up having a nasty surprise as you would end up owing the IRS a lot of tax during the filing season, as many people found out to their displeasure in the 2019 tax season. Withhold more than the required amount and the IRS will end up having to refund you. Much of the confusion stems from the frequent changes to the Tax Cuts and Jobs Act (TCJA), which leads employees and employers confused.
The new and reformed TCJA law eliminated personal exemptions, changed tax rates and brackets, increased standard deduction, increased child tax credit and discounted or certain limited deductions. It resulted in alternated returns for some of the taxpayers, which means the refunds were larger or smaller than expected in some cases. There were a few exceptional ones in which the filers owed more tax during their 2018 returns.
The significant law changes put the people and families with multiple sources of income under a strict radar of tax withholding. People who adjusted their withholdings in 2018, especially from the middle part of the year are required to complete a Paycheck Checkup in 2019.
The IRS encourages people with multiple jobs to do a Paycheck Checkup at the earliest. In case, if there are significant adjustments needed, you and the federal government will have more withholding time over the year.
The irs.gov provides a tool called Withholding Calculator to run an easy Paycheck Checkup. The tax filers can adjust their income estimate, deductions, credits and moreover, they can cross-check the amount of taxes withheld from their finances with the help of the Withholding Calculator. While using the calculator, make sure your previous tax payments are cleared as it will simplify the process automatically.
Using the tool’s recommendations, the taxpayer can fill a new Form W-4 and submit it to the employer. There are chances for you to claim a less amount of withheld tax and have an extra flat-dollar amount reserved from your pay.
The reformed laws of TCJA changed the way of calculating tax for most taxpayers. It includes the self-employed population too. This results in a fluctuating amount of estimated tax payments during the year.
With the help of Form 1040-ES on the website of IRS, you can figure out the exact amount of your estimated tax. It has income tax rate schedules for the current year, a worksheet for figuring out the correct amount and a quick guide of the essential changes to tax laws.
Going through a major change in your life is also a part where you should consider doing a Paycheck Checkup. It can include having a newborn, getting married or divorced, and buying a house as all of them incur significant taxable and non-taxable expenses.
The taxpayers have the privilege to pay the estimated tax at any time of the year. Most of them prefer to divide the whole amount into four chunks and pay them by the established due dates for each quarter of the fiscal year. The remaining due dates for 2019 are 17th June, 16th September, and 15th January 2020.
Thus, if you are pursuing multiple employment opportunities, you need to ensure that each of your employers is withholding the accurate amount of tax from your salary every month. This will ensure that while filing taxes at the end of the fiscal year you will not be liable to pay unexpected taxes to the IRS.
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