This Summer – Review Your Taxes Now To Prevent Surprises Next Spring

Every year, many people end up with a larger refund than expected, and others find they owe a lot more tax than they thought they would. If this has happened to you in the past, consider reviewing your tax situation now to prevent any surprises next year. Have you had a change in income? Did you get married? Or, have you had a child? Some of these major life events can have a significant impact on your taxes. By taking action now, you can bring the tax you pay closer to the amount you owe.

Here are a few ways to help you come up with a plan of action now, before any surprises pop up:

  • New Job. When starting a new job, you must fill out a Form W-4, Employee’s Withholding Allowance Certificate. Your employer uses this form to figure out the amount of federal income tax to withhold from your pay.
  • Life Events. A change in your marital status, buying a new home, or the birth of a child can change the amount of taxes you owe, so check to see if you need to change your Form W-4 or change the amount of estimated tax you are paying.
  • Estimated Tax. Anyone who earns income that isn’t subject to withholding may need to pay estimated tax. Included might be income such as self-employment, interest, dividends or rent. If you’re expecting to owe a thousand dollars or more in tax, you may need to pay this tax, which is typically paid four times a year.
  • Changes in Circumstances. If you’re receiving advance payments of the premium tax credit, it is important that you report changes in circumstances, like changes in your income, family size, or any changes to your Health Insurance Marketplace. Advance payments of the premium tax credit help you pay for insurance you buy through the Health Insurance Marketplace. By reporting any of these changes, it will help you get the proper type and amount of financial assistance, so you can avoid getting too much or too little in advance.

To read the entire article, please visit www.irs.gov.

 

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