Aug 01, 2020
By Brandon Yuska CPA, Senior Manager at Terry Lockridge & Dunn
2020 has been one unexpected event after another. One surprise you do not want is find out next spring you owe additional taxes.
The IRS has a tax withholding estimator to assist in your Paycheck Checkup. It is at: https://www.irs.gov/individuals/tax-withholding-estimator. There are a few documents you will want to have on hand before you begin: 1) most recent paycheck stub showing current and year to date earnings and Federal payroll tax withholdings; 2) any pensions or unemployment compensation being received during 2020; 3) your 2019 tax return to estimate income other than wages/pensions and the amount of expected tax credits. If you are contributing to a flexible spending plan or a retirement plan through payroll, you will need to know the 2020 amounts to be contributed. Also, if you plan to itemize for 2020, you will need to know those amounts. If you are married, this information needs to be for both spouses.
Once you have these items gathered, it will not take long to work through the calculator. If you decide after a few screens that you need to revise a previous answer, you can go back and make the update without losing information entered. Once completed, you can print out your results. Once you leave the website, the information will not be retained. You will also need to consider other income items such as capital gains and miscellaneous income. All income input is calculated at ordinary income tax rates, so keep that in mind when reviewing the results.
August is a good time for a Paycheck Checkup to see if you are on track. There are still several payrolls left in 2020 to adjust your tax withholding. Reach out to Brandon at firstname.lastname@example.org or to your accountant if you would like to discuss your specific situation. They can be reached at 319-364-2945 in Cedar Rapids, or 319-339-4884 in Iowa City.