Help with taxes for seniors is now easier than ever with the new Tax Withholding Estimator, launched in August on IRS.gov. It includes user-friendly features to help retirees easily figure out the right amount of tax to be removed from their pension payments.
The mobile-friendly estimator replaces the Withholding Calculator. The estimator has features tailored to the needs of retirees receiving pension payments and Social Security benefits.
The new tool gives retirees, as well as employees and self-employed individuals, a more user-friendly option for checking their withholding. Whether they get wages or pension payments, it helps taxpayers estimate if the correct amount is being withheld from their income to cover their tax liability. The estimator uses a simple, six-step question-and-answer format using information including marital or filing status, income, withholding, adjustments, deductions and credits, according to an IRS press release.
To help individuals use the tool most effectively, the IRS is hosting a free two-hour webinar on Thursday, Sept. 19 at 2 p.m. Eastern Standard Time. The webinar will feature step-by-step instructions on how to use the new estimator and a live question-and-answer session. To sign up, visit the webinar page on IRS.gov.
Special Assistance for Retirees
A retiree can utilize the estimator to enter any pension income or Social Security benefits they or their spouse receive. The tool automatically calculates the taxable portion and incorporates it into an overall estimate of their projected tax liability and withholding for the year. If a withholding change is needed, the retiree can choose a tax due of close to zero or a refund amount. The estimator will then link to Form W-4P, Withholding Certificate for Pension or Annuity Payments, and give the retiree a specific withholding recommendation based on the option chosen. It also gives instructions on how to fill in each line of the form, the news release added.
Enhancements for All
The enhancements for retirees are some of features offered by the Tax Withholding Estimator. Others include:
- Plain language to improve taxpayer understanding.
- Mobile-friendly design.
- A new progress tracker to help taxpayers know how much more information they need to enter.
- The ability to go back and forth through the steps, correct previous entries and skip questions that don’t apply.
- Tips and links to help users quickly determine if they qualify for various tax credits and deductions.
- Automatic calculation of taxes on self-employment income.
The IRS urges pension recipients and wage-earners to do a Paycheck Checkup now and review their withholding for 2019. This is especially important for anyone who faced an unexpected tax bill or penalty when they filed earlier this year. It’s also a critical step for those who made withholding adjustments in 2018 or had a major life change, such as marriage, the birth of a child, adoption or buying a home, the IRS said in the release.
People most at risk of having too little tax withheld include those who itemized in the past, but now take the increased standard deduction. They also include households with two wage earners, employees with non-wage sources of income and those with complex tax situations.
Also, anyone who changes their withholding in the middle or latter part of 2019 should do another Paycheck Checkup in January. That will help ensure they have the right amount of tax withheld for all of 2020.