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It is important that as the end of the year approaches taxpayers consider the amount of withholding that are being deducted from their pay, in fact, they are encouraged to perform a tax withholding checkup to ensure that they are not allowing more to be withheld than is needed. Also, by performing this checkup now, taxpayers can adjust their withholding to avoid paying less than the required taxes and thus avoid an unexpected tax bill later.
Who would benefit from a withholding check-up:
1. Taxpayers who received large tax refunds in past years
Having large refunds in prior years might be due to the taxpayers having too much taxes withheld from their paychecks over and about what is required. When a taxpayer has too much tax withheld from their paycheck, they end up paying too much tax during the year, hence the large tax refund. They can change their withholding to pay just the right amount of taxes and have money upfront rather than waiting for a bigger refund.
2. Taxpayers who owed taxes in years past
The goal here is to get the amount of taxes withheld to be as close as possible to the taxes due. Taxpayers with too little tax withheld might find themselves with a tax bill at the end of the year. Under-withholding can lead to both a tax bill and an additional penalty. Similar to overpayment of taxes, tax payers can remedy this situation by adjusting their withholdings so that withholding and taxes due are as close as possible.
3. People with a second job
It is important that taxpayers who work more than one job check the total amount of taxes they have withheld so that it approximates taxes due as close as possible and make adjustments as necessary. This includes adjusting their withholdings up or do so that their withholding covers the total amount of the taxes they owe, based on their combined income from all their jobs.
4. Taxpayers who make estimated tax payments
Also, there are some taxpayers who make quarterly estimated tax payments throughout the year. Among these persons are: self-employed individuals, partners, and S corporation shareholders. Some of these persons also have an employer. If this is the case, these taxpayers can often forgo making these quarterly payments by having more tax taken out of their pay via withholdings.
5. People with a new job
If you are starting a new job it is imperative that you ensure that enough taxes are being withheld from your pay. This should be to the point where your withholdings are enough to cover the taxes due from your old and new job. withheld.
Form W-4 is used by employees to make the adjustment to their withholdings. To make sure their employer withholds the right amount of tax, employees can prepare a new Form W-4, Employee’s Withholding Allowance Certificate. In many cases, this is all they need to do. The employer uses the form to figure the amount of federal income tax to be withheld from pay. This takes time, so taxpayers should make adjustments as soon as possible so the changes can take affect during the final pay periods of 2017.
User | 10/12/2017