It’s that time of the year – to check tax withholdings
Posted on November 6, 2020
Teipen CPA Group wants to remind all taxpayers that November is a good time to review your 2020 tax withholding payments to avoid a surprise when filing this year’s taxes in spring, 2021.
With less than two full months to go in 2020, if you need to have more taxes withheld in the last quarter of 2020, you may be still able to avoid an uncomfortably large tax bill come April.
What could affect taxes owed in 2020?
- Coronavirus tax relief – That’s right. COVID-19 Tax relief help for taxpayers, businesses, and other tax-exempt organizations– including health plans – are often taxable. But not always. It’s complicated. Ask your CPA for help understanding your particular situation.
- Unemployment compensation – Yes, again, even though you may have lost a job (and millions of Americans did in 2020), if you got unemployment compensation, taxes are due on those payments. Taxes can also be withheld from these benefits – which may be worth looking into. (Unsure of how to do this? Ask us for help.)
- Workers new to the “gig economy.” If you are working independently of a business that takes out taxes from every paycheck, you may not realize how much tax you owe. Paying quarterly estimated tax payments helps you stay current. (Need help setting that up? Ask us.)
- Getting married, retiring or having a child are just three life changes that can affect how much taxes you owe.
- Moving to a new state in 2020 likely means you will owe state taxes in your former state as well as your new state. It gets a little complicated. (Yes, we can help with this, too.)
Teipen CPA Group’s advice? Pay as you go.
It just makes sense to pay taxes quarterly during the year rather than all at once in April – especially the more you owe. Whether from salary withholding, or quarterly estimated tax payments, or a combination of both, this helps take the sting out of April.
It’s easy and convenient for taxpayers to pay taxes electronically throughout the year. The IRS accepts payments online, by phone, or via the IRS2Go app. If you choose an electronic payment option to schedule estimated tax payments, you will receive email notifications about due dates and amounts received. Plus – the process is very safe.
Try the IRS Tax Withholding Estimator
The IRS launched an improved online Tax Withholding Estimator tool to make it easier for individuals to figure out the right amount of tax to withhold during the year. It’s ideal for anyone who made withholding adjustments in 2020, had a major life change, or were adversely affected by the pandemic.
Not sure of where you stand tax-wise this year?
A quick visit to IRS.gov/account will allow you to view your taxes owed, your tax payment history, and key tax return information from their most recent tax return. If you are already on a payment plan, you’ll see details about that, too.
But for more complicated situations, or if you have any questions related to your personal situation, you can always give us a call at Teipen CPA Group.