Even though only a few weeks remain in 2014, you still have time to act so you aren’t surprised at tax time. You can take steps now to avoid owing more taxes or getting a larger refund than you expect. Following are some actions you can take now to bring the taxes you pay in advance closer to what you’ll owe when you file your tax return:
- Adjust your withholding. If you are an employee and you think that your tax withholding will fall short of your total 2014 tax liability, you may be able to avoid an unexpected tax bill by increasing your withholding. If you are having too much withheld, you may get a larger refund than you expect. In either case, you can complete a new Form W-4 Employee’s Withholding Allowance Certificate and give it to your employer. Enter the added amount you want withheld from each paycheck until the end of the year on Line 6. Usually you can have less tax withheld by increasing your withholding allowances on Line 5. Use the IRS Withholding Calculator tool on IRS.gov to help you complete the form.
- Report changes in circumstances. If you purchase health insurance coverage through the Health Insurance Marketplace, you may receive advance payments of the premium tax credit in 2014. It is important that you report changes in circumstances to your Marketplace so you get the proper type and amount of premium assistance. Some changes you should report include changes in your income, employment or family size. Advance credit payments help you pay for the insurance you buy through the Marketplace. Reporting changes will help avoid getting too much or too little premium assistance in advance.
- Change taxes with life events. You may need to change the taxes you pay when certain life events take place. A change in marital status or the birth of a child can change the amount of taxes you owe. When they happen, you can submit a new Form W-4 at work, or change your estimated tax payment.
- Be accurate on your W-4. When you start a new job and fill out a Form W-4, it is important to accurately complete the form. For example, special rules apply if you work two jobs or you claim tax credits on your tax return. Your employer will use the form to figure the amount of federal income tax to withhold from your pay.
- Pay estimated tax if required. If you get income that is not subject to withholding, you may need to pay estimated tax. This may include income such as self-employment, interest or rent. If you expect to owe $1,000 or more in tax, and meet other conditions, you may need to pay this tax. You normally pay the tax four times a year. Use Form 1040-ES Estimated Tax for Individuals, to figure and pay the tax.
For more, see Publication 505 Tax Withholding and Estimated Tax. You can get it from IRS.gov.