Were you stunned to find out that you owed when filing your tax return this past season?
The solution may be changing your tax withholding so that this does not happen to you again. Did you receive a large refund? You might want to adjust your withholding in this situation also. Receiving a refund basically means that you are providing an interest-free loan to the government.
Adjust Payroll Tax Withholdings Now
Taxpayers should occasionally examine their tax situation and modify withholding, as needed.
The IRS has provided a withholding calculator at: https://www.irs.gov/individuals/tax-withholding-estimator This is a great tool to help taxpayers examine their tax situation. The calculator takes tax law changes into consideration in areas such as available itemized deductions, the child credit, the dependent credit, and the repeal of dependent exemptions.
Other Lifestyle Changes That Impact Your Tax
Tax law changes are not the only reasons taxpayers should check their withholding. There are several other reasons you should examine your withholding, for example, if you:
- Modified your withholding last year, especially in the middle or later part of the year,
- Owed tax when you filed your 2021 return,
- Received a refund that was much smaller than expected,
- Just got married or will be divorced before year-end,
- Newborn child or adoption completed,
- New homeowner, or
- Had a significant change in income.
At any time (or even multiple times) during the year, you can revise your withholding. You just need to fill out a new Form W-4 and submit it to your employer or payroll department. It usually takes a few weeks for the new W-4 to go into effect once submitted. (If you submit quarterly estimated tax payments, you can also adjust those vouchers with each payment.)
You still have time to examine your situation for your 2022 tax return and make any necessary withholding adjustments, as needed. Please contact us if you need assistance or have any questions. Your Wegner CPAs tax specialist is available to assist in determining if you should adjust your withholding.