The IRS has re-released its estimated tax calculator (IR-2019-139, 8/6/19) to better address the multitude of changes included in the Tax Cuts and Jobs Act (TCJA).
The previous version of the estimated tax calculator was roundly criticized by members of the tax community after numerous taxpayers were blindsided by an unexpected tax bills and penalties for the 2018 tax year. Frequently, problems occurred when taxpayers didn’t adjust withholding and/or quarterly installments enough to account for the loss of personal exemptions and certain itemized deductions.
The IRS had advised taxpayers to conduct a withholding check-up during the course of last year, but the warning often went unheeded. To add insult to injury, working with the calculator was confusing and burdensome for many of those who attempted it.
Along with the re-launch, the IRS is in the process of revising its withholding forms to reflect the TCJA changes. It is offering workers—as well as retirees, self-employed individuals and other taxpayers— an easy-to-use step-by-step tool for effectively figuring out the amount of income tax they should have withheld from wages and retirement plan payments.
“The new estimator takes a new approach and makes it easier for taxpayers to review their withholding,” said IRS Commissioner Chuck Rettig in a prepared statement. “This is part of an ongoing effort by the IRS to improve quality services as we continue to pursue modernization and enhancements of our taxpayer relationships.”
According to the IRS, it took comments and concerns of both tax practitioners and taxpayers to heart. It claims to have installed many user-friendly features, including the following:
• Plain language throughout the tool to improve comprehension.
• The ability to more effectively target at the time of filing either a tax due amount close to zero or a refund amount.
• A new progress tracker to help users see how much more information they need to input.
• The ability to move back and forth through the steps, correct previous entries and skip questions that don’t apply.
• Enhanced tips and links to help the user quickly determine if they qualify for various tax credits and deductions.
• Self-employment tax for a user who has self-employment income in addition to wages or pensions.
• Automatic calculation of the taxable portion of any Social Security benefits.
• A mobile-friendly design.
In addition, the new Tax Withholding Estimator is desgined to make it easier to enter wages and withholding for each job held by the taxpayer and his or her 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.
Ken Berry, Esq., is a nationally known writer and editor specializing in tax, financial, and legal matters. During his long career, he has served as managing editor of a publisher of content-based marketing tools and vice president of an online continuing education company. As a freelance writer, Ken has authored thousands of articles for a...