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IRS Launches New Tool for Estimating Taxes

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The Internal Revenue Service has launched the new Tax Withholding Estimator, an expanded, mobile-friendly online tool designed to make it easier for everyone to have the right amount of tax withheld during the year. The Tax Withholding Estimator replaces the Withholding Calculator, which offered workers a convenient online method for checking their withholding. The new Tax Withholding Estimator 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 new estimator takes a new approach and makes it easier for taxpayers to review their withholding,” said IRS Commissioner Chuck Rettig. “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.” The IRS took the feedback and concerns of taxpayers and tax professionals to develop the Tax Withholding Estimator, which offers a variety of new user-friendly features including:

  • 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 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.

The new Tax Withholding Estimator will help anyone doing tax planning for the last few months of 2019. Like last year, the IRS urges everyone to do a Paycheck Checkup and review their withholding for 2019. 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 2018 or had a major life change.

Those most at risk of having too little tax withheld include those who itemized in the past but now take the increased standard deduction, as well as two-wage-earner households, employees with nonwage sources of income and those with complex tax situations.

 

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Paycheck Checkup May be Needed

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The Tax Cuts and Jobs Act made significant changes to the tax law, including increasing the standard deduction, eliminating personal exemptions, increasing the child care tax credit, limiting or discontinuing certain deductions and changing the tax rates and brackets.  While these changes did not affect the 2017 tax returns they will affect the 2018 tax returns filed next year.  For this reason the IRS is continuing to push a “paycheck checkup” for all employees but especially seasonal or part-time employees. To assist employees the IRS unveiled several new features to help people navigate the issues affecting withholding in their paychecks. The effort includes a new series of plain language Tax Tips, a YouTube video series and other special efforts to help people understand the importance of checking their withholding as soon as possible including a withholding calculator.

Employees can use the Withholding Calculator to estimate their 2018 income tax. The Withholding Calculator compares that estimate to the employee’s current tax withholding and can help them decide if they need to change their withholding with their employer.  When using the calculator, it’s helpful to have a completed 2017 tax return available. Employees who need to adjust their withholding will need to submit a new Form W-4, Employee’s Withholding Allowance Certificate, to their employer. If an employee needs to adjust their withholding, doing so as quickly as possible means there’s more time for tax withholding to take place evenly during the rest of the year. But waiting until later in the year means there are fewer pay periods to make the tax changes – which could have a bigger impact on each paycheck.

Among the groups who should check their withholding are:

  • Two-income families.
  • People working two or more jobs or who only work for part of the year.
  • People with children who claim credits such as the Child Tax Credit.
  • People with older dependents, including children age 17 or older.
  • People who itemized deductions in 2017.
  • People with high incomes and more complex tax returns.
  • People with large tax refunds or large tax bills for 2017.

FBI Warns of Another Phishing Scam Against Employees

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The FBI is now warning employers of a possible phishing scam taking place.  This one targets the employees themselves. It focuses on companies that use self-service platforms where employees can view their pay, get duplicates of W-2s and update direct deposit information.  The fraudsters are impersonating the employer’s human resources department and asking employees to update or confirm their personal information via a fake website.  The employee receives a fake email that asks the employee to click on the link provided to log into his self-service account.  The email asks the employee to logon to view a private email from HR, to view changes that have been made to their account, or to confirm that the account is still active.

By clicking on the link and entering their self-service credentials, the employee is actually giving their logon information to the fraudster. The fraudster than can go into the self-service account himself and access all of the information including W-2 and pay stub info.  He can also change the direct deposit information. In order to prevent the victim from from knowing what is going on, the fraudster will also change the email address that the self-service platform uses to send alerts when changes are made.

Payroll and human resources professionals need to be on the lookout for this type of email.  With the new tax bill causing new tax withholding decisions, many employees are making good use of these types of self-service portals.  This will be especially true when the new Form W-4 is issued by the IRS.  Employees will want to make sure they have the proper withholding under the new tax tables.  And it would not be “unusual” for payroll or HR to send out emails during this time-frame.

It is also imperative to practice what the FBI calls “good email hygiene”.  Train your employees to watch for phishing attacks and to also check the actual email address rather than just looking at the display name.  Both these items can be crucial to seeing the attack early, before the damage is done.

GA 2015 Employer Guide Now Available

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The Georgia Department of Revenue has updated the Employer’s Tax Guide, which contains information regarding personal income withholding tax filing requirements based on the tax law as of January 1, 2015. The withholding tables have not been changed. Don’t be concerned if you go to their website and still see it listed as 2014.  They updated the Guide but not the website!

MI Has a New System but No New Tables

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In January 2015, the Michigan Department of Treasury began to process current year SUW tax returns with a new online system.  As a result of this new processing system, there will be changes to the SUW forms and to the way taxpayers can file and make payments for returns in tax year 2015 and beyond. The new bundle of e-services is called Michigan Treasury Online (MTO). Business taxpayers have 24/7 access to their accounts and will be able to file returns electronically, pay SUW tax due in one convenient transaction and make routine account changes.

However, although the income tax withholding rate remains at 4.25% for tax year 2015 but the personal exemption amount changed to $4,000, employers should continue to use the 2014 Michigan income Tax Withholding Tables

OR Withholding Changes

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The Oregon Department of Revenue has released the wage-bracket withholding tables.  These updated tables reflect the increased federal tax subtraction to $6,450 and other changes to indexed items. If employees need help in making sure proper amount of tax is withheld they may use Department Publication 150-206-643, Oregon Income Tax Withholding.

2015 Publications and Forms

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I am still catching up from my vacation over the holidays.  The IRS has released the following publications for 2015:

  • Publication 15, The Circular E. It is now available on the IRS website.   http://www.irs.gov/pub/irs-pdf/p15.pdf
  • Publication 15-B, Employer’s Tax Guide to Fringe Benefits  http://www.irs.gov/pub/irs-pdf/p15b.pdf
  • Publication 51, Circular A, Agricultural Employers Tax Guide  http://www.irs.gov/pub/irs-pdf/p51.pdf
  • Publication 80, Circular SS Federal Tax Guide for Employers in the U.S. Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands http://www.irs.gov/pub/irs-pdf/p80.pdf

In addition, the IRS has also released the 2015 Form W-4 http://www.irs.gov/pub/irs-pdf/fw4.pdf