Why Employers Should Advise Their Employees to Use the IRS’s Tax Withholding Estimator
September 28, 2020
The Internal Revenue Service (IRS) is urging employers to encourage their employees to use its tax withholding estimator when filing their 2020 tax returns. The estimator is an effective tool when it comes to calculating taxes as well as avoiding any future surprises when it comes time for tax season. While there are still months until the beginning of the next tax season, DM Payroll Solutions recommends advising employees to use the tax withholding estimator now as a proactive measure.
What Changes Withholding Amounts?
If your employees have had any of these life events happen within the past year, they should check their withholding:
- Purchase of a new home
The IRS also recommends anyone who received a larger refund than normal or a tax bill to use the estimator to check their withholding amounts, as they could be affected.
What Are the Benefits of Using the Estimator?
On top of evaluating life events when it comes to changes in withholding, the IRS recommends taxpayers conduct a paycheck checkup to ensure the correct amount of tax is being withheld from their paychecks. To strike a chord with your employees, mention that checking withholding amounts now instead of closer to tax time can safeguard them from not having enough tax withheld and facing unexpected (and steep) tax bills or penalties. If your employees realize they’re withholding too much, advise that they may withhold less tax up front to free up cash in the meantime but receive a smaller tax refund. During this uncertain COVID-19 era, more money available now may benefit many employees.
As beneficial as the tax withholding estimator is for your employees, it also lessens the likelihood that you, the employer, would be involved in any tax-related issues come tax season. For example, your employee doesn’t use the estimator and finds out they actually owe money on their tax returns, and a lot of it at that. The employee could potentially blame you or bring you into the problem, claiming you improperly submitted the amount they would like to withhold. The estimator ultimately gives employees the responsibility to check on their withholding amounts and eliminate any issues before they arise.
Here to Help
As an employer, your employees trust you to provide them with the resources they need to succeed. By informing them of the IRS’s tax withholding estimator, you’re protecting them (and your business) from any tax-related issues that could arise during tax season. If you have questions about updating employees’ withholding amounts each paycheck, contact DM Payroll Solutions today.