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With the last quarter of 2020 just beginning, the IRS reminds taxpayers that now is the perfect time to review their withholding and payments to avoid a surprise when filing next year.
An adjustment or two made now may boost take home pay or allow taxpayers to pay more in the last quarter of 2020 to avoid a surprise tax bill.
Some things to consider that will affect taxes owed in 2020 include:
Taxes are generally paid throughout the year whether from salary withholding, quarterly estimated tax payments or a combination of both. About 70% of taxpayers, however, over withhold their taxes every year which typically results in a refund. The average refund in 2020 was well over $2,400.
Taxpayers can pay electronically, throughout the year, online, by phone or with a mobile device and the IRS2Go app. They can choose an electronic payment option to schedule estimated tax payments and receive email notifications about their payments.
Taxpayers can also visit IRS.gov/account to view their taxes owed, payment history and key tax return information from their most recent tax return as originally filed and, if they have one, they’ll see details about their payment plan.
IRS reminds people that there are many factors that affect the timing of a refund. The fastest way to get a tax refund is by filing electronically and choosing Direct Deposit. IRS issues most refunds in less than 21 days, but it’s possible it can take longer.
The IRS launched an improved Tax Withholding Estimator tool last summer to make it easier for everyone to have the right amount of tax withheld during the year. This is especially important for anyone who faced an unexpected tax bill or a penalty when they filed this year. It’s also an important step for those who made withholding adjustments in 2020, had a major life change or were adversely affected by the pandemic.
The tool offers workers, as well as retirees, self-employed individuals and other taxpayers, a more user-friendly step-by-step tool for effectively tailoring the amount of income tax they have withheld from wages and pension payments.
The tax withholding estimator has several key features for ease of use:
In addition, the new Tax Withholding Estimator makes it easier to enter wages and withholding for each job held by the taxpayer and their spouse, as well as separately entering pensions and other sources of income. At the end of the process, the tool makes specific withholding recommendations for each job and each spouse and clearly explains what the taxpayer should do next.
As the year is coming to a close, now is the time to consider tax planning strategies for the 2020 tax year. Contact us today to schedule your Tax Planning Meeting.
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