Each and every year I see a handful of clients that are more shocked than surprised at how much they may owe at time time. I tell them to start thinking about tax consequences for the following year right after I finish the current year return! Below is a tax tip from the IRS that may answer a few questions and I recommend you make any necessary changes now so you have that shocked look at year end! Please feel free to contact me directly should you have further questions!
From the IRS:
- New Job. When starting a new job, an employee must fill out a Form W-4, Employee’s Withholding Allowance Certificate. Employers use this form to calculate how much federal income tax to withhold from regular pay, bonuses, commissions and vacation allowances. The IRS Withholding Calculator tool on IRS.gov is easy for taxpayers to use to figure how much tax to withhold to avoid surprises.
- Estimated Tax. People who have income not subject to withholding may need to pay estimated tax. Those expecting to owe $1,000 or more than taxes withheld from their wages may also need to make estimated tax payments to avoid penalties. The worksheet in Form 1040-ES, Estimated Tax for Individuals, helps to figure the tax.
- Life Events. A change in marital status, the birth of a child or the purchase of a new home can change the amount of taxes a taxpayer owes. The Managing Your Taxes After a Life Event page on IRS.gov provides resources to explain the tax impact of these changes. In most cases, an employee can submit a new Form W–4 to their employer anytime.
Here is a helpful video on the IRS withholding calendar: