 internal revenue service IRS tax news not too much not too little taxpayers should check if their tax withholding is just right not too much not too little but just right huh is it just me or does it sound like the IRS is calling the American taxpayer Goldilocks over here now I'm not some dumb blonde with my Goldilocks hair who like walks into random houses and just starts taste testing bulls a hot porridge on the table I mean honestly if anything you're the one coming into my home and in my porridge IRS you're the porridge stealer around here you're the you're the porridge stealer don't be projecting at me like that IRS everyone knows the real story I mean you've even gotten so used to my generosity that you now require me to mail you my porridge and even that's not good enough the US Postal Service being too slow and who runs that place anyway now you want me to electronically transfer my porridge which is ridiculous plus IRS you really shouldn't be calling people dumb blondes it's insensitive stereotypical and bigoted you should be ashamed of yourself for doing it you know actually now that I look at this again not too much not too little but just right maybe the IRS does realize that they are Goldilocks and they're just reminding me how they like their porridge prepared you know I don't make the porridge for you Goldilocks IRS that's my family's porridge dang it you'll eat what I give you and like it I mean not to fat shame or anything but you're already like 500 pounds but whatever a climate activist named dawn broke into a museum just before dawn glued her butt to a famous painting and proclaimed the world will finally come to their senses and yield at the crack of dawn tonight the age man comes to an end no more compromise the police took action very politely no greetings what seems to be your bottle she then took her threat a step further pulling out food cans not throwing soup on the painting but instead eating five cans of extra spicy chili all right now it's sale time remember we don't take no from anyone we don't take no prisoners we don't take no for an answer oh yeah we don't take no for an answer then the crack of dawn fired off a warning shot that cleared out the entire museum one little heavy on the pine tree perfume there kid sir it's a taxi cab air freshener great you've pinpointed it step two is washing it off police officials debated their options I'm with you let's go blow this guy away blow this guy away whatever she's got away with words after some debate the world properly seized all fossil fuel production and I'm sorry to say that the world has become a great eat bunch version of itself and by a bunch of road all we have to do the run the whole thing is to kill a man named Frank who put it all to after realizing we could power the entire world using solely the energy fired out of the crack of dawn our early attempts at a tractor beam went through several preparations preparations a through G were a complete failure but now ladies and gentlemen we finally have a working tractor beam which we shall call preparation age but wait that's silly you can't save the world from global warming by using cow emissions as far as on the whole I think preparation age feels good COVID tax tip 2022-168 November 2nd 2022 there are good surprises and there are bad surprises generally a tax related surprise is probably unwanted to avoid tax surprises people should review their tax withholding let's first take a step back and just think about the tax process and when we have to pay the taxes in general that being the IRS wanting their money as you earn the money so for talking tax year 2022 even though the tax return is not due until next year by April 15th 2023 in general you can't wait and pay all of your taxes by April 15th 2023 and you might say well I don't want to do that that's why I don't do that because then I would have a whole big bill that I would have to pay by April 15th 2023 no that's not why you don't do it that way you don't do it that way because if you did the IRS would hit you with penalties and interest the goal is to pay as little taxes as possible the IRS wants to get their money as soon as possible and therefore they require their payments to be happening as you earn them throughout 2022 in this case so how do they do that they can pressure the employer oftentimes to force you to have withholding by making you fill out a w4 and so on so you're giving the information with generally the w4 in that case to the employer the employer then is required to go by the information that you give them in order to make the withholdings would be the general idea now if you're self-employed then of course you have to make quarterly payments to the IRS now if everything was static are going forward meaning the tax code wasn't changing a lot and people's tax circumstances were changing a lot meaning they have the same job for multiple years they've got the same number of people working in their household then although the tax code is quite complex you can kind of hone down your withholdings over time if there's some consistency but at this point in time we've got a tax code which is quite complex a tax code that's changing a lot over the last few years and working situations where people are bouncing around a lot more and having different people working within households which makes the income tax system a lot more difficult it's not a flat tax remember so we can't just say okay well I'll pay as I earn the money so as I earn the money if I earned $10,000 so I'll pay whatever the tax rate is for $10,000 no you have to pay the tax rate that would be like the average tax rate because we have a progressive tax system and whatnot so it's kind of a confusing calculation even if you knew how much you were going to make and even people that are W2 employees don't know how much they're going to make these these days because they might not be at one particular job for a long time or they might have multiple things going on you might have gig work going on so that makes it more and more necessary to to run projections into the future so that you can properly calculate your withholdings and to avoid the penalties and interest that's the general idea okay so there's still time left in 2022 to make changes and see the benefit of their tax return next year an adjustment made now will help people avoid the surprise of a balanced due or a larger than expected refund notice that you the reason a refund is not really the desirable effect is because if you're getting a large refund that means that you could have gotten that money earlier and from a cash management standpoint typically if we can get the money earlier that's usually better because then we can invest that money and and or use it to whatever we need so we would like to have our paycheck is as high as possible while still being able to not owe any taxes at tax time not simply because we you know we're gonna have to owe whatever we owe in terms of the taxes whether we prepay it or not but we're trying to pay the taxes to avoid the penalties that's that's the idea so we don't want to pay more taxes than we're legally required to do how do we do that we we shoot for a refund we shoot for a refund not because we just want a refund but because we want to we want to avoid penalties and interest and it's impossible to hit it perfectly because the tax system is way too complex to do that so people who owe taxes when they file may also face a penalty so there's a link to that here for underpayment so they should take steps to avoid that it's an especially good idea to check withholding I'll win a taxpayer has a big life change now a big life change you get married you you get divorced or you buy a home these are things that typically are are gonna change but these days everybody's having pretty significant changes just because the tax code is changing if nothing else you got stimulus payments you got the child you know credits going out which are gonna go up and then they're gonna stop and you got these temporary laws that that are taking place so again if we were in static times then if you worked a one income family household and they have the same job that was going steadily going forward they own the home and you got the mortgage payments which are pretty much similar from year to year it's pretty easy to make your estimates in that case but if you've got multiple people working jobs are changing the tax code is fluctuating then you're gonna have to pretty much everyone's gonna have to be making estimates if they're trying to get their withholdings to line up so even events like marriage divorce and new child and new home purchase or changes in tax laws can all be reasons to adjust withholdings credit amounts may change each year taxpayers can visit irs.gov and use the interactive tax assistant so there's some nice tools for that for the estimator tool online at the irs you pretty much need software to try to project properly into the future and in some of the tools they have on online these estimator tools are getting closer to like tax software to give a pretty good projection so you can use that to identify whether they qualify for any tax credits that may call for a withholding adjustment so taxes pay as you go so taxes are generally paid throughout the year so once again the IRS wants their money in 2022 not when you file the tax return by April 15th 2023 you're not paying them during the year just because you don't want to have a big bill at the end of April at the April 15th you're paying it so that you don't pay more taxes because the penalties and interest so whether from salary withholding quarterly estimated tax payments or a combination of both about 70% of taxpayers however with old withhold too much every year this typically results in a refund so if you withhold too much it's not a big problem because then you get a refund and but you just you could have gotten that money sooner in your paychecks so you'd like to kind of have a sweet spot if you get if you're getting way too much of a refund you know not a big deal it's better than owing more taxes but if you need that money it could be a big deal and if you have the money sooner you could you could invest it you know sooner and do what you want to do with it so a few other facts about refunds proper withholding adjustments there's a link to that here help people boost their take-home pay rather than over withholding taxes throughout the year and getting it back as a refund so that's the that's the play here that's the interplay do you get more money in your paycheck and then get a and then get lesser of a refund or do you have less money paycheck to paycheck because you have more withholdings which gives you a bigger cushion to clear your tax obligation and not be penalized and most likely result in a larger refund and when you file the tax return while the IRS issues most refunds in 21 days or less from an error-free electronic tax return it may take longer for different reasons it's generally not a good idea to rely on refund for big purchases so even if you think you're gonna get a refund you don't want to really go out and start spending money based on the money that you expect to get until you get it in your hands unless you need to of course so I mean if you've got bills that are coming up in their requirements but you shouldn't go by you know frivolous things until you get the money generally so direct deposit there's a link to that here is the easiest and most convenient way to get a refund the IRS issues more than 90% of all refunds this way paper return processing delays stemming from the pandemic are six months or more so the IRS COVID-19 operations page there's a link to that here offers complete details the tax withholding estimator so here's their estimator tool pretty good tool to to use it's getting more and more like a projection tax software there's a link to it here so if you have questions about in my over or under withholding the only way to really figure that out is to actually basically do a tax return and obviously tax software is not out generally for tax year 2022 you need to use projection software and if you don't have access to that you can you can use the IRS tax withholding estimator here which is pretty pretty good so there's a link to that can help you determine if they have too much income tax withheld and how to make an adjustment in other cases it can help taxpayers see if they should withhold more or make an estimated tax payment there's a link to that here to avoid a tax bill when they file their taxes return next year now note if you owe too much money you know at I mean if you have to adjust your tax withholding now in November then you might have to make drastic adjustments if you're short on your taxes to try to avoid penalties and interest so you might have to make a drastic adjustment now and then check it again in January or at least by April once you've done your taxes to see if you did a proper adjustment and then you'll have to adjust your withholdings again for tax year 2023 because now you have a longer time frame so you would like to get your tax withholdings the same for the entire year right but again that's really difficult to do with the complexity in people's tax situations these days you're basically guessing what your tax situation will be in terms of income and tax laws and credits and whatnot to do that so in any case other items may affect 2022 some unforeseen life events can make withholding adjustments necessary they include coronavirus tax relief tax help for taxpayers businesses tax exempt organizations and others affected by the coronavirus disasters such as wildfire and hurricanes special tax law provisions may help taxpayers and businesses recover financially after a disaster especially when the federal government declares their location a major disaster area job loss IRS publication 4128 tax impact of job loss explains how this unfortunate circumstance can create new tax issues workers moving into the gig economy due to the pandemic here's the one the IRS is really after if you're going into the gig economy you're on you're on the IRS's hit list I'll tell you what you better watch yourself any case people earning income in the gig economy should review their estimated tax payment to avoid a balanced due or penalties when they file so there's more information at the link below we got the tax withholding link and then we got links to the tax estimator tool which is a good tool to kind of check out your estimating situation and there's links to all the other stuff we said there's link here's a whole bunch of stuff there'll be a link to this in the description