You can start by finding your total federal taxes paid for 2023, which is listed on line 24 of your tax return. If your gross income and tax situation has not changed from last year, you are likely to owe a similar amount for 2024, Lucas explained.   

Next, you will need to review your pay stubs.

If you have paid roughly 75% of last year’s total taxes by the end of September, “you’re going to be pretty darn close, assuming everything is the same as the prior year,” he said.  

However, “there’s a whole slew of things that can change” from year to year, such as a second job, higher income, divorce, marriage or birth of a child, which makes your tax situation different, Lucas said. 

In those scenarios, you will need a more in-depth analysis to double-check your 2024 withholding, he said.    

If your tax situation changed this year, experts recommend periodically using a free tool from the IRS, known as the “tax withholding estimator.”

The tool factors in your marital status, dependents, number of jobs, other sources of income, most-recent paystub, taxes withheld, estimated tax payments and other details.  

After plugging in your information, the IRS provides a prefilled Form W-4, which you can then provide to your employer to increase or decrease your withholding.

Alternatively, you could make payments directly to the IRS to cover your 2024 tax shortfall, Lucas said.

Either way, “you’ve got to keep an eye on it,” or you could face an unexpected tax bill, along with penalties and interest, said Mark Steber, chief tax information officer at Jackson Hewitt.

If you update your tax withholding via Form W-4, you will want to make sure the change is accurate and reflected in future paychecks through the end of the year, Lucas said.

But your withholding should be temporary through 2024 and you will need to resubmit Form W-4 again in January, he warned. Otherwise, you could withhold too much for 2025. 

Tax breaks worth trillions of dollars are scheduled to expire after 2025 without extension from Congress — including a hefty deduction for millions of self-employed filers and business owners.  

Enacted by former President Donald Trump, the Tax Cuts and Jobs Act of 2017 created the qualified business income deduction, or QBI, which is worth up to 20% of eligible revenue, subject to limitations.

The temporary deduction applies to so-called pass-through businesses, which report income at the individual level, such as sole proprietors, partnerships and S-corporations, along with some trusts and estates. 

“The hope is that this gets extended because it’s going to be very disruptive for a lot of business owners” if the tax break is allowed to expire, said Dan Ryan, a tax partner at law firm Sullivan and Worcester.

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Lawmakers added the temporary QBI deduction to the Tax Cuts and Jobs Act to create tax rates for pass-through businesses that are similar to tax rates for corporations.

But while the QBI deduction will sunset after 2025, the legislation permanently reduced corporate taxes by dropping the top federal rate from 35% to 21%.

For tax year 2021, the most recent data available, there were roughly 25.9 million QBI claims, up from 18.7 million in 2018, the first year the tax break was available, according to the IRS. 

“It’s something that is very important to a lot of privately held businesses,” said Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center.

As the 2025 tax cliff approaches, there have been “very strong feelings” about whether to extend the QBI deduction, according to Garrett Watson, senior policy analyst and modeling manager at the Tax Foundation.  

Business advocates say the deduction promotes growth and have pushed to make the tax break permanent. Meanwhile, some policy experts and lawmakers point to the high cost and the deduction’s complexity.

The QBI deduction is “fairly pricey,” with an estimated 10-year cost of more than $700 billion, Watson said. That could pose a challenge amid debate over the federal budget deficit.

Other critics say the QBI deduction primarily benefits the wealthy because higher earners are more likely to have pass-through income. However, there are millions of middle-income taxpayers also claiming the deduction, according to IRS data.

Watson said some Democrats are eager to see the tax break expire, “but that runs right into the president’s tax pledge.”

White House National Economic Advisor Lael Brainard in June reaffirmed President Joe Biden’s promise to extend Trump’s tax breaks only for those making less than $400,000.

The IRS will deny billions of dollars’ worth of claims for a pandemic-era tax break while working to process lower-risk filings, the agency said on Thursday afternoon.

Enacted to support small businesses during the Covid-19 pandemic, the employee retention credit, or ERC, is worth thousands of dollars per eligible employee. However, the agency stopped processing new filings in September amid a surge of “questionable claims,” the IRS said in a news release.

The agency added that it will extend that moratorium.  

After investigating more than 1 million claims worth roughly $86 billion, the IRS said in the release that it identified 10% to 20% of the highest-risk filings, and “tens of thousands” will be rejected in the coming weeks, according to the agency. Another 60% to 70% of claims with an “unacceptable level of risk” will be further examined, the IRS said.

“We will now use this information to deny billions of dollars in clearly improper claims and begin additional work to issue payments to help taxpayers without any red flags on their claims,” IRS Commissioner Danny Werfel said in a statement.

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During the ERC review period, the agency processed 28,000 claims received before September 2023 worth $2.2 billion and disallowed more than 14,000 claims worth $1 billion, according to the release.

Overall, compliance efforts for erroneous ERC claims have topped more than $2 billion since last fall, the IRS said.

“This is one of the most complex credits the IRS has administered, and we continue to ask taxpayers for patience as we unravel this complex process,” Werfel said. “Ultimately, this period will help us protect taxpayers against improper payouts that flooded the system and get checks to those truly eligible.”

With more than 1.4 million unprocessed ERC claims and many “questionable” filings, the IRS urges taxpayers with pending ERC claims to consider the agency’s withdrawal program. 

There’s still time to withdraw a claim if you haven’t received a payment for any tax period. If you received a check but haven’t cashed or deposited it, you can use this program to return it.

If eligible, the IRS will undo the original ERC claim and no penalties or interest will apply.

“It’s a mulligan moment” because you can still fix ERC mistakes before the IRS catches them, Dean Zerbe, national managing director at Alliantgroup, previously told CNBC.

The U.S. Department of the Treasury and the IRS on Monday unveiled a plan to “close a major tax loophole” used by large, complex partnerships, which could raise more than an estimated $50 billion in tax revenue over the next 10 years.

The plan targets so-called “related party basis shifting,” where single businesses operating through different legal entities trade original purchase prices on assets to take more deductions or reduce future gains, according to the Treasury.

“These tax shelters allow wealthy taxpayers to avoid paying what they owe,” IRS Commissioner Danny Werfel told reporters on a press call Friday.  

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After a year of studying the basis-shifting issue, the agencies announced their intent to issue proposed regulations. They also released a revenue ruling on related-party partnership transactions involving basis shifting without “economic substance” for the parties or “substantial business purpose.”    

The plan builds on ongoing IRS efforts to increase audits on the wealthiest taxpayers, large corporations and complex partnerships.

“Treasury and the IRS are focused on addressing high-end tax abuse from all angles, and the proposed rules released today will increase tax fairness and reduce the deficit,” U.S. Secretary of the Treasury Janet Yellen said in a statement.

Pass-through business filings with more than $10 million in assets increased 70% between 2010 and 2019, but the audit rate for these partnerships fell from 3.8% to 0.1% during that period, according to the Treasury. 

This has contributed to an estimated $160 billion a year tax gap — the shortfall between what is owed and collected — attributed to the top 1% of tax filers, the agency said.

The announcement comes less than one week after President Joe Biden’s top economic advisor unveiled his “key principles” for tax policy, including sustained IRS funding.  

“We should ensure ultra-wealthy taxpayers pay what they owe and play by the same rules by maintaining the President’s investment in the IRS,” White House National Economic Council advisor Lael Brainard told reporters Wednesday during a press call.

IRS funding has been a target for Republicans since Congress approved nearly $80 billion in funding via the Inflation Reduction Act.