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February 2023

IRS Reminds Wage Earners to Adjust 2023 Withholding Now or Face a Surprise Later


    In order to avoid effectively handing the government an interest-free loan of their money or to minimize the possibility of penalties and interest if too little tax is withheld, the Internal Revenue Service (IRS) has alerted taxpayers to make adjustments to their 2023 withholding.

    The IRS said on Jan. 19 that it has created an online tool accessible for wage-earning individuals to utilize in order to determine whether or not too much or too little tax is being withheld from their paychecks.

    The Tax Withholding Estimator is a tool that helps taxpayers determine if they will get a refund or whether they must give the IRS money in order to avoid owing taxes and maybe facing penalties the following year.
    Waiting for a tax return while having too much tax withheld is equivalent to giving the government a loan with no interest.

    However, a taxpayer may owe money while filing their taxes if not enough taxes were withheld from their paychecks throughout the year. This implies that when they file their tax return, they will also need to pay the IRS the outstanding tax amount.

    Tax season debt can be a big financial hardship, particularly if it is high or the taxpayer is having trouble making ends meet.

    When the person files their taxes and has a balance due, there may also be penalties and interest that are applicable. The IRS begins charging interest on any unpaid taxes at the time the return was initially due. Additionally, if the taxpayer misses the deadline for filing their return or for paying any taxes they owe, penalties may be imposed.

    Because owing a balance is regarded as an unpaid debt, it can also hurt your credit score. If the person doesn't pay their taxes, other consequences include wage deductions, property liens, and even incarceration.

    Avoid paying quarterly estimated taxes.

    Taxes are paid as income is produced during the year in the United States because taxes are paid on a pay-as-you-go basis. Withholding from paychecks, pension payments, Social Security benefits, and certain other government payments is often how this is accomplished.

    The IRS may force individuals with numerous income sources, such as those who have a second job or income from self-employment, unemployment, annuities, the gig economy, or digital assets, to pay quarterly estimated tax payments. This is done to make sure they are paying the right amount of taxes each quarter and to prevent owing money when they file their taxes.

    The IRS claims that people can customize the amount of income tax that should have been withheld from their paychecks by utilizing the Tax Withholding Estimator tool, which can also help them eliminate the need to make quarterly anticipated tax payments. Taxpayers can update the amount of tax withheld by filing a new Form W-4 to employers after deciding how much should be withheld.

    Various Updates
    Individuals and businesses in specific counties in Georgia and Alabama harmed by the storm now have until May 15, 2023 to file and pay their federal tax returns, the IRS announced on Jan. 19.
    The Federal Emergency Management Agency (FEMA) has currently recognized Butts, Henry, Jasper, Meriwether, Newton, Spalding, and Troup counties in Georgia and Autauga and Dallas counties in Alabama as areas that are eligible for this relief.

    The list of acceptable locations can be seen on the IRS website, and it includes other areas that FEMA later adds to the disaster area. In times of disaster, there is tax relief.
    The tax relief delays the filing and payment deadlines that were initially set to begin on January 12, 2023. As a result, impacted taxpayers will have until May 15, 2023, to complete their forms and make any necessary tax payments.

    The IRS also announced on January 17 that taxpayers can now use its Free File Guided Tax Preparation service.
    For those and families who made $73,000 or less in 2022, the program offers free online tax preparation software.

    The IRS also announced on January 12 that the tax filing date is April 18 and that it would start collecting 2022 tax returns on January 23.

    According to the organization, 168 million individual tax returns are anticipated to be filed this year, with the "great majority" being done so before the April 18 deadline.

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