Nearly half (45%) of American's don't remember when they last updated their withholdings. Paying tax is last on the list for most American's, which gives them fuzzy
feelings. But, getting hit with a “surprise tax” bill when filing tax returns?
That makes American's frustrated, disappointed, concerned, and angry at the same time.
The IRS debuted a new version of a W-4 form around last year at the same time. But if you're like most American's you may not have noticed it. Only about 1 out
of 4 American's have updated their withholdings, according to a survey by the American Institute of Certified Public Accountants. Nearly 2 out of 5 American's admit
they are unfamiliar with the new update of W-4.
To avoid this nasty surprise of tax AICPA's program is helping American's to check their tax withholdings and update the same in the new W-4. Correct filing of W-4
form decides whether you get a refund or nasty surprise on Tax day.
To circumvent such a nasty surprise, check your withholdings and update W-4 sooner than later. By making suitable changes, you can prepare for the 2020 tax bill and
set yourself up for a less stressful 2021.
Update W-4 form using IRS withholding Estimator Tool
The IRS recommends regular check-ups of your withholdings whenever you experience any life event such as marriage, childbirth, or adoption, as such events can have a
considerable impact on your tax situation. The nation's tax collectors also hope you give regular check-ups – Especially when the IRS keeps updating occasionally.
To see how your tax bill will look, you'll need to enter information such as your wages, your current withholding rate, and whether you contribute to a tax-deferred
retirement plan. After you enter the required information, the tool will estimate your possible refund or whether you need to pay any added tax.
To adjust, you need to fill up the W-4 form and submit it to the employers' payroll department.
Avoid the shock of the large tax bill's
The amount you've withheld from your paycheck falls short of what you owe in 2020, the income you'll have to pay the difference to the IRS on Tax day. Depending on
how low you are, you may also owe an underpayment penalty equal to 3.4%, the percentage which gets reduced, as sooner you pay it off before April 15.Other sources of
assets can create a withholding gap. Unemployment benefits taxed as income on the federal level, but having withheld is the next step when applied for tax benefits.
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