IRS Says Retirees Should Check Pension and Social Security Withholdings ASAP

A new alert from the Internal Revenue Service (IRS) advises retirees to check to see if they are having enough taxes withheld during the year, as part of a Paycheck Checkup campaign to lead taxpayers to the agency's online withholding calculator to double check, reports the Washington Post . According to the IRS, retirees who receive a pension or annuity check might have to revise the amount of federal income tax withheld, because if they do not have enough taken out they could owe taxes and perhaps be penalized. "Among other reforms, President Trump's new law changed the tax rates and brackets, increased the standard deduction, removed personal exemptions, and limited or discontinued certain deductions," the alert warns. "As a result, many taxpayers may need to raise or lower the amount of tax they pay in during the year." The withholding calculator is mainly for people getting a paycheck, but pensioners can use it as well to estimate their total income, deductions, and tax credits for this year. The IRS recommends calculator users treat their pension as if it is wage income, entering the gross amount of each payment, how often they receive a payment, and the amount of tax withheld so far in 2018. "A little-noticed effect of last year's tax overhaul is that many pension payments are now larger, reflecting the new lower tax rates in effect for 2018," notes the Wall Street Journal's Laura Saunders. "But this bump-up increases the risk that recipients will be underwithheld at tax time next year — and therefore owe a penalty. To avoid this, retirees should immediately check their withholding and adjust it if necessary."