Tax Withholding Estimator helps retirees; figures tax on Social Security benefits

WASHINGTON — The new Tax Withholding Estimator, launched last month on IRS.gov, includes user-friendly features designed to help retirees quickly and easily figure the right amount of tax to be taken out of their pension payments. 

The mobile-friendly estimator replaces the Withholding Calculator. The estimator has features specially tailored to the unique needs of retirees receiving pension payments and Social Security benefits.

The new tool offers retirees, as well as employees and self-employed individuals, a more user-friendly way to check their withholding. Whether they receive wages or pension payments, it helps taxpayers estimate if the right amount is being withheld from their income to cover their tax liability. The estimator uses a simple, six-step question-and-answer format using information like marital or filing status, income, withholding, adjustments, deductions and credits.

To help people use the tool most effectively, the IRS is holding a free two-hour webinar on Thursday, Sept. 19 at 2 p.m. Eastern time. Among other things, the webinar will feature step-by-step instructions on how to use the new estimator and a live question-and-answer session. To sign up, visit the webinar page on IRS.gov.

Special help for retirees

A retiree can use the estimator to enter any pension income or Social Security benefits they or their spouse receive. The tool then automatically calculates the taxable portion and incorporates it into an overall estimate of their projected tax liability and withholding for the year. If a withholding change is needed, 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 give the retiree a specific withholding recommendation based on the option chosen. It also gives instructions on how to fill in each line of the form.

Enhancements for everyone    

The enhancements for retirees are just a few of the many new features offered by the Tax Withholding Estimator. Others include:

• Plain language to improve taxpayer understanding.
• Mobile-friendly design.
• A new progress tracker to help taxpayers know how much more information they need to enter.
• The ability to go back and forth through the steps, correct previous entries and skip questions that don’t apply.
• Tips and links to help users quickly determine if they qualify for various tax credits and deductions.
• Automatic calculation of taxes on self-employment income.

The IRS urges both pension recipients and wage-earners to do a Paycheck Checkup now and review their withholding for 2019. This is especially important for anyone who faced an unexpected tax bill or penalty when they filed earlier this year. It’s also a critical step for those who made withholding adjustments in 2018 or had a major life change, such as marriage, the birth of a child, adoption or buying a home.

People most at risk of having too little tax withheld include those who itemized in the past, but now take the increased standard deduction. They also include households with two wage earners, employees with non-wage sources of income and those with complex tax situations.

Also, anyone who changes their withholding in the middle or latter part of this year should do another Paycheck Checkup in January. That will help ensure that they have the right amount of tax withheld for all of 2020.

Treasury, IRS release final and proposed regulations on new 100% depreciation

WASHINGTON — The Treasury Department and the Internal Revenue Service today released final regulations and additional proposed regulations under section 168(k) of the Internal Revenue Code on the new 100% additional first year depreciation deduction that allows businesses to write off most depreciable business assets in the year they are placed in service by the business.

The regulations released today on IRS.gov have been submitted to the Federal Register and may vary slightly from the published documents due to minor editorial changes. The documents published in the Federal Register will be the official documents.

The final regulations finalize the proposed regulations issued in August 2018 which implement several provisions included in the Tax Cuts and Jobs Act (TCJA). The proposed regulations contain new provisions not addressed previously.

The 100% additional first year depreciation deduction generally applies to depreciable business assets with a recovery period of 20 years or less and certain other property. Machinery, equipment, computers, appliances and furniture generally qualify.

The deduction applies to qualifying property acquired and placed in service after Sept. 27, 2017. The final regulations provide clarifying guidance on the requirements that must be met for property to qualify for the deduction, including used property. The final regulations also provide rules for qualified film, television and live theatrical productions.

Additionally, in the proposed regulations, the Treasury Department and IRS propose rules regarding (i) certain property not eligible for the additional first year depreciation deduction, (ii) a de minimis use rule for determining whether a taxpayer previously used property; (iii) components acquired after Sept. 27, 2017, of larger property for which construction began before Sept. 28, 2017; and (iv) other aspects not dealt with in the previous August 2018 proposed regulations. The proposed regulations also withdraw and repropose rules regarding application of the used property acquisition requirements (i) to consolidated groups, and (ii) to a series of related transactions. 

For details on claiming the deduction or electing out of claiming it, see the final regulations or the instructions to Form 4562, Depreciation and Amortization (Including Information on Listed Property). For tax years that include Sept. 28, 2017, see Rev. Proc. 2019-33 for further information about making a late election or revoking an election.

Taxpayers who elect out of the 100% depreciation deduction must do so on a timely-filed return. Those who have already timely filed their 2018 return and did not elect out but still wish to do so have six months from the original deadline, without an extension, to file an amended return.

For more information about this and other TCJA provisions, visit IRS.gov/taxreform.