WASHINGTON — As the year 2023 swiftly approaches its conclusion, the Internal Revenue Service (IRS) is advising taxpayers to promptly review their tax withholding to avoid potential surprises when filing their tax returns next year.
In an effort to prevent unexpected outcomes, such as substantial refunds or balances due, the IRS recommends that taxpayers verify their withholding early in the year. Nevertheless, adjustments made in the final weeks of 2023 can still mitigate surprises when tax returns are filed in the upcoming year.
With only a few weeks remaining in 2023, the IRS is strongly encouraging individuals who haven’t assessed their withholding recently to do so promptly. The IRS provides several resources to assist in this process.
Tax Withholding Estimator
The Tax Withholding Estimator, available in both English and Spanish, serves as a valuable tool for taxpayers to determine if they have an excess of income tax withheld and guides them on how to make necessary adjustments. Additionally, the tool aids taxpayers in recognizing whether they should withhold more or make estimated tax payments to avoid a tax bill when filing their 2023 tax return.
This user-friendly, mobile-compatible tool accommodates workers, retirees, self-employed individuals, and others, helping them calculate the accurate amount of income tax that should be withheld from their wages and pension payments based on their specific set of circumstances.
Taxpayer Options to Pay as They Go
Taxes are typically paid throughout the year, with employers withholding income tax from their employees’ salaries and remitting it to the IRS on the employees’ behalf. However, approximately 70% of taxpayers over-withhold each year, resulting in a refund.
For individuals earning income not subject to withholding, such as income from rental properties, gig economy work, or self-employment, the IRS advises considering quarterly estimated tax payments. These can be submitted via mail with Form 1040-ES or paid online, by phone, or through the IRS2Go app on a mobile device. Taxpayers can also utilize their Online Account, accessible at IRS.gov/account, to make estimated tax payments and view payment histories and other tax records.
Other Factors Affecting 2023 Taxes
Various common and unforeseen life events can trigger the need for withholding adjustments. Examples include:
- Life Changes: Events like marriage or childbirth can impact a taxpayer’s refund or the amount owed.
- Job Loss: IRS Publication 4128, Tax Impact of Job Loss, explains how job loss can create new tax issues, such as receiving unemployment compensation.
- Disasters: Special tax law provisions may assist taxpayers and businesses in recovering financially from the impact of disasters, particularly when the federal government declares their location a major disaster area.
The IRS emphasizes that a refund is not guaranteed. Proper withholding adjustments enable individuals to boost take-home pay rather than being over-withheld and waiting for a tax refund.
For those eligible, the fastest way to receive a tax refund is by filing electronically and opting for Direct Deposit. While most refunds are issued within 21 days for error-free and paperless tax returns, some may take longer for various reasons.
For additional information on estimated taxes and tax withholding, refer to Tax Withholding.