A recent report by independent research firm, Edelman Intelligence, predicts that by 2027, the majority of the U.S. workforce will be comprised of freelance and contract workers. While there is a myriad of benefits to working as a freelancer, it does require a greater understanding for how your taxes should be managed. Optima Tax Relief reviews the IRS’ recent release of its new Tax Withholding Estimator Tool – a free tool developed by the IRS to make it easier for employees who receive self-employment income to accurately estimate and manage their tax liability.
This new Withholding Estimator Tool was designed to be an enhanced version of the previous Tax Withholding Calculator, which has been helping taxpayers since 2001, and features a number of improved capabilities to help manage your taxes for the millions of freelance taxpayers in the United States.
Unlike the previous Tax Withholding Calculator, this new, mobile-friendly tool was intentionally designed to meet the needs of freelancers. The new tool is dynamic, user-friendly, and will aid not only freelancers, but also retirees, self-employed individuals and other taxpayers.
The new tool has the functionality to enable freelancers to enter their self-employment income, as well as any other additional wages or pensions. The Withholding Tool then dynamically alerts the user of any special tax benefits they qualify for, such as the self-employment health insurance deduction. The estimator then automatically applies these deductions to the overall tax liability, for accurate, easy understanding of your total tax snapshot.
And while tax season may seem like it is still in the far-off distance, the IRS is recommending that all taxpayers take advantage of the Tax Withholding Estimator Tool now to conduct their own Paycheck Checkup. By taking a few minutes to use the tool, taxpayers can ensure their tax withholdings are correct and avoid any surprises come tax time.