IRS Spotlights Tax Withholding Estimator Tool for Retirees

The IRS has strongly urged retirees to use its Tax Withholding Estimator tool for help with calculating projected tax liability and withholding. In fact, a retiree can use the estimator to enter any pension income or Social Security benefits received during the year. Subsequently, the tool automatically calculates the taxable portion and incorporates it into an overall estimate of projected tax liability and withholding for the year. If a withholding change is required, the retiree can choose a tax due of close to zero or a refund amount. The estimator will then link to Form W-4P, Withholding Certificate for Pension or Annuity Payments, and offer the retiree a specific withholding recommendation based on the option selected. In addition, the tool also gives instructions on how to fill in each line of Form W-4P.

The IRS also encouraged both pension recipients and wage-earners to do a Paycheck Checkup now and review their withholding for 2019. Further, anybody who changes their withholding in the middle or latter part of this year has been encouraged to do another Paycheck Checkup in January to ensure that they have the right amount of tax withheld for all of 2020. To help people use the tool most effectively, the IRS is holding a free two-hour webinar on Thursday, September 19 at 2:00 p.m. Eastern Time. Among other things, the webinar will also feature step-by-step instructions on how to use the new estimator and a live question-and-answer session. Taxpayers can sign up for the webinar by visiting the webinar page on the IRS website.