As the new tax season quickly approaches, we all want to make sure that we pay as little in taxes as possible when we file. With this in mind, now is the perfect time to be able to make any last minute adjustments.
As our lives change, often so does our tax situation. Some reasons why your final tax bill (or refund) may change could be from:
- A recent change in jobs or having multiple jobs throughout the year
- An incorrectly filled out W-4 for tax withholdings
- Any big financial events such as selling a house or partnership interest
- A change in filing status or the number of dependents eligible for tax credits
- A change in the amount of self-employment income earned
- Additional income is received such as interest, dividends, capital gains, and/or gambling earnings
For those who file a simple return during tax season, estimating your potential tax payment can be as simple as comparing your total earned income to your income tax bracket. You can use the IRS-Tax Withholding Estimator for help with this. However, if you itemize your deductions, own a business, or have other complexities affecting your tax situation, estimating your tax liability can become more complicated, and you should reach out to your accountant rather than using this tool.
Your W-4
When you start a new job, you are required to fill out a W-4 for your tax withholdings. Beginning in tax year 2020, the IRS changed the W-4 form to help taxpayers keep the most amount in their paycheck; however, in some cases, this has resulted in taxpayers owing money with their tax returns. Therefore, some steps of the W-4 have become more difficult to fill out for taxpayers who have multiple jobs, claim dependents, and/or have other income not from jobs. If you have any questions on how to fill out your W-4, ask your accountant for help.
When you start a new job, you are required to fill out a W-4 for your tax withholdings. Beginning in tax year 2020, the IRS changed the W-4 form to help taxpayers keep the most amount in their paycheck; however, in some cases, this has resulted in taxpayers owing money with their tax returns. Therefore, some steps of the W-4 have become more difficult to fill out for taxpayers who have multiple jobs, claim dependents, and/or have other income not from jobs. If you have any questions on how to fill out your W-4, ask your accountant for help.
What to do if you think you’ll owe
If you think you will owe at the end of the year, it is imperative that you have a good idea as to how much. There’s nothing worse than getting an unexpected tax bill. However, if you can adjust your withholding before the year is up, you can minimize any owed amount due. This can be done by adding additional withholding to your W-4 (found on line 4c).
If you think you will owe at the end of the year, it is imperative that you have a good idea as to how much. There’s nothing worse than getting an unexpected tax bill. However, if you can adjust your withholding before the year is up, you can minimize any owed amount due. This can be done by adding additional withholding to your W-4 (found on line 4c).
The IRS generally advises taxpayers to make estimated tax payments if you expect to owe $1,000 or more when you go to file (after taking into account any additional withholdings and refundable credits). If you think you need to pay in more to cover your 2022 tax liability, you have the option of making an estimated tax payment on or before January 17, 2023. Further, if your accountant already set up a 4th quarter estimated tax payment from the 2022 tax season, make sure to make this payment on or before January 17, 2023.
Still need help?
As always, our accountants at Mason + Rich are ready to answer any additional questions and help guide you. Feel free to call us at 603-224-2000.
Still need help?
As always, our accountants at Mason + Rich are ready to answer any additional questions and help guide you. Feel free to call us at 603-224-2000.
RSS Feed