Adjust Your Withholding Now to Avoid Tax Surprises Next Year
Taxes are a necessary part of life. But managing them can be tricky, especially when your tax situation changes due to major life events like marriage, divorce, or adding or losing a dependent. To avoid any surprises next year and make sure you’re not stuck with large tax bills or penalties, the Internal Revenue Service (IRS) recommends that taxpayers use the Tax Withholding Estimator available on their website now. Let’s take a closer look at what this tool is and how it can help taxpayers manage their taxes for 2023.
What Is the Tax Withholding Estimator?
The Tax Withholding Estimator is an online tool available on IRS.gov that helps taxpayers determine how much money should be withheld from their paychecks in order to cover their income taxes for the year 2023. It takes into account any changes in your tax situation—like marriage, divorce, adding children, etc.—and also looks at factors like filing status, number of dependents and salary information to estimate how much you should set aside each paycheck throughout the year to cover your 2023 taxes. This tool can also help you project whether you may receive a refund or owe money directly to the IRS when it’s time to file your 2023 taxes next year.
Taxes are essentially a “pay-as-you-go” system; rather than paying all of your income taxes in one lump sum at the end of the year, most people set aside small amounts from each paycheck throughout the year so that they're not stuck with large amounts due when it comes time to file their taxes. The Tax Withholding Estimator is designed to help people do this efficiently by ensuring that enough money is being withheld from each paycheck so that there aren't any surprises when it comes time to file next year.
Additionally, using this tool now can actually save taxpayers money in some cases by helping them avoid having to make quarterly estimated tax payments throughout 2023 if they find out they're underpaying through withholding from their paychecks alone. This can help people maximize their income and avoid unnecessary penalties associated with mismanaging withholding throughout the year.
The IRS urges all taxpayers who earn wages (not salaries) during 2023 to use the Tax Withholding Estimator now before making any adjustments in their withholdings. Doing so can help ensure that you don't have any surprises come filing season next year—plus it could even save you some money! If your tax situation has changed since last year due to major life events like marriage or divorce or having children move out on their own, using this calculator could make all the difference come next April 15th. So don't wait—take advantage of this free resource now!