It’s obviously no fun owing the IRS money. Especially, if you’ve lost your job or have been financially impacted by the coronavirus. So, with tax season 2020 officially here, the decision on whether or not to withhold depends on your financial situation. If you’re barely making ends meet, it can be tempting to put off paying taxes in the hopes of being in a better financial situation later. That said, it can be devastating to get hit with a massive tax bill by spring.
Consider the options
Your options include paying when you file your tax return, making estimated quarterly tax payments, or having your taxes automatically withheld. Many sole proprietors and freelancers make estimated quarterly tax payments. Doing so lets you spread out what you owe into four payments over the course of the year. However, because these payments are based on your estimated total income, you may wind up overpaying. In that case, you’ll receive a refund. If you pay too little, expect to make an extra payment by the April 15 tax deadline.
If you’ve been out of work and collecting unemployment, you can choose to have your unemployment checks taxed like a regular paycheck. You can do this by filling out Form W-4V. When submitting this form, the government will withhold taxes due on each check. This will both reduce the amount of money you receive in hand –but also reduces the likelihood of receiving a large tax bill coming all at once.
As always, consult your accountant or tax professional with any questions. Lastly, be sure to Follow Fingercheck for all the latest employment, small business, and HR news and insights.