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If you are still smarting from last year’s surprise tax bill, hear this: The Internal Revenue Service (IRS) has created a new tax withholding estimator — a redesigned online tool — that can help you eliminate unexpected tax bills or obtain a larger refund come April 15.
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The IRS previously adapted its old withholding calculator to the new tax legislation passed in late 2017 but realized it needed to go further to make it more useful to taxpayers. The result is the new tool.
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The IRS Tax Withholding Estimator is “a little more tailored to your individual situation based on your answers” in six steps, IRS spokesman Eric Smith says.
What’s new about it?
First, the estimator figures how much tax you owe on your Social Security retirement benefits and Social Security Disability Insurance (SSDI) and incorporates that number into your total tax liability if you enter the correct numbers at each step.
The previous calculator did not clearly include Social Security, Smith says.
Second, the estimator can recommend how much tax you might want to have withheld from your pension.
Third, the estimator gives you a choice if you want a refund or prefer to owe no more than a small amount if you file your 2019 taxes by April 15. The choices it gives you:
- I’d like to get a refund
- Get my balance close to zero
“You can choose how much you want withheld,” Smith says. “If you want to avoid a big tax bill, specify that you want a refund of $500 or more.”
After you’ve answered, “I’d like to get a refund,” you’re offered only once choice, “For a refund of approximately or greater than $500.” If you choose, “Get my balance close to zero,” your only option is, “For a refund of approximately or greater than $50.”
Either way, the estimator links you to a blank Form W-4 on the IRS website.
“It will tell you what to enter in each line,” Smith says. “You can download the W-4 and print it and give it to your employer.”