For those accustomed to receiving refunds every year, an unexpected tax bill can be a real hardship. Fortunately, there’s still time to make sure the right amount of federal income tax is being withheld from your paycheck for 2020.
IRS Form W-4 is used to tell your employer how much tax to withhold from each paycheck. When the Tax Cuts and Jobs Act (TCJA) (a major tax reform bill passed in December 2017) limited certain itemized deductions and reduced the personal exemption to zero, many taxpayers simply weren’t having the correct amount of tax withheld.
An updated version of Form W-4, which takes the TCJA changes into account, was released near the end of 2019. Although the revised form is more complicated than prior versions, it should increase the accuracy of your withholding amounts.
The IRS also designed a more robust tool to assist taxpayers in completing the new Form W-4. If you haven’t reviewed your withholding recently, you should consider using the IRS’s “Tax Withholding Estimator,” available at www.irs.gov/individuals/tax-withholdingestimator. You will need your most recent pay stubs, details of other sources of income, and a copy of your
most recent tax return.
However, keep in mind that the calculator isn’t perfect. If you want more precise results, we would be happy to put together a 2020 tax projection for you. If you make estimated tax payments throughout the year (you’re self-employed, for example), we can take a closer look at your tax situation for 2020 to make sure you’re not underpaying or overpaying.
Also, if you’ve already filed your 2019 return and applied an overpayment to 2020, but would now prefer a refund, you have until 7/15/20 to file a superseded return and request a refund. This may be beneficial if you’re experiencing financial hardship due to the COVID-19 crisis.
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