IRS Issues New Alert on What You Must Do Before the Year Is Over
This can help you avoid a "potential surprise" when you file your taxes in 2024.
The stress of tax season is enough to make most of us never want to think about taxes again—let alone in the same calendar year. But you might be hurting yourself down the line if you wait until January to start getting things together for filing. In fact, the Internal Revenue Service (IRS) is now urging taxpayers to make sure they're completing certain tasks by the end of 2023 in order to avoid potential consequences. Read on to find out what the latest IRS alert entails.
RELATED: IRS Announces Major Tax Filing Changes for Next Year—Are You Affected?
The IRS says taxpayers should review their tax withholding right now.
Dom't wait until the new year to start thinking about your taxes. In a Nov. 3 press release, the IRS issued a new alert about tax withholdings. With 2023 coming to an end, the agency is urging "taxpayers to review their tax withholding as soon as possible."
"With only a few weeks left in the year, the IRS encouraged people who haven't checked their withholding recently to do it soon so they can make any withholding adjustments needed," the agency said in its release.
RELATED: IRS Warns That Claiming These Credits Can Get You Audited and Fined.
This can help you avoid a "potential surprise" next year.
There's almost always some amount of money coming out of every paycheck, which is our tax withholding. That refers to income tax our employers withhold from our paycheck to pay to the IRS on our behalf throughout the year. But there is no set amount that they're taking out for everyone across the board—tax withholding varies from person to person.
In fact, the IRS said that about 70 percent of taxpayers withhold too much from their paycheck—which is why they end up with a refund after they file their return. On the other hand, some taxpayers—especially those earning income that's not subject to withholding, such as income from rental properties, gig economy work, or self-employment—may not be withholding enough during the year, leading to them to have to pay a large balance during tax season.
That's why the agency is encouraging taxpayers to review their tax withholdings now in order to "avoid a potential surprise" when they submit their return in 2024.
"An adjustment made in the final weeks of 2023 could still help to avoid an unexpected result, such as a big refund or a balance due, when filing taxes next year," the IRS explained in its release.
RELATED: 6 Tax Return Secrets From Accountants.
You may want to change your tax withholding based on certain factors.
According to the IRS, a person's regular tax withholding is usually determined by two things: the amount of income you earn, and the information you give your employer on your W-4 form. But the agency said that "common and unforeseen life events can be a trigger to make withholding adjustments."
For your 2023 taxes, that could include job loss, natural disasters like wildfires or hurricanes, and life changes such as marriage or childbirth.
"The IRS reminds taxpayers that a refund is not guaranteed," the agency added. "Proper withholding adjustments help people boost take-home pay rather than be over-withheld and get it back as a tax refund."
The IRS has an online tool meant to help you.
If you want to take the agency's advice and check your tax withholding, there's an easy way for you to do so. The IRS has an online tool called the Tax Withholding Estimator that can "help taxpayers determine if they have too much income tax withheld and how to adjust tax withholding," according to the release.
It can also help you see if you should withhold more or make an estimated tax payment to avoid a large tax bill when you file your 2023 tax return.
"The tool offers workers, retirees, self-employed individuals and other taxpayers a simple-to-use, mobile-friendly way to calculate the correct amount of income tax they should have withheld from wages and pension payments based on their complete set of facts and circumstances," the IRS stated in its release.
If you use the Tax Withholding Estimator and decide you want to change your tax withholding based on your results, you can do one of three things. You can complete a new W-4 form and submit it to your employer, complete a new W-4P form and submit it to your payer, or make an additional tax payment to the IRS before the end of the year, according to the agency's website.
RELATED: For more up-to-date information, sign up for our daily newsletter.
Best Life offers the most up-to-date financial information from top experts and the latest news and research, but our content is not meant to be a substitute for professional guidance. When it comes to the money you're spending, saving, or investing, always consult your financial advisor directly.
