You don’t need me to remind you that a lot has changed in the world in the last few years. We have had major tax law changes. People have changed jobs or seen many changes to the jobs they have kept. People have had new kids or had kids grow up and leave the house. The point is the world is changing and your income tax situation is probably changing along with it. So have you checked your tax withholding lately?
As your tax situation changes, so does the amount you should be withholding with each paycheck. If you suddenly owe a lot one year or have a suspiciously large refund that may be like a warning light going off it’s easy to forget to tweak your numbers. However, a little time spent looking at your withholding now can save you from an unpleasant surprise later.
Thankfully, the IRS makes it easy to check what your withholding should be by providing a calculator. The website IRS withholding calculator allows taxpayers to enter their information for the coming year and determine if their withholding is appropriate. Some people like to pay in just enough to cover what they owe, and others prefer to give themselves a little cushion so they will get a refund each year, but either way, the withholding calculator can help you see where you stand.
If you do find that you need to make changes to your withholding, you can file a new W-4 with your employer at any time during the year.
If you find that your W-2 withholding is not enough because you have substantial income beyond your W-2 wages, then you might need to pay quarterly estimates as well. In that case, you will probably want to reach out to a tax professional to help you determine what needs to be done.
We all know that there are plenty of things we’d rather be doing than filling out new W-4’s, but with all the changes in the world in the last few years, it might be a good time to make sure you have the right amount of withholding on your paycheck.
If you have any questions, please contact your Henry+Horne advisor.