As 2023 draws to a close, it is crucial for taxpayers to take a moment to review their tax withholding. This isn’t just about avoiding surprises when filing taxes next year, but also about achieving a balance that works best for your financial situation. Even late-year adjustments can significantly affect your tax outcome and help bring some financial balance and clarity.
The IRS’s Tax Withholding Estimator is a key resource for this. This user-friendly, mobile-compatible tool can guide you in determining the right amount of tax to withhold, whether you are an employee, retiree, self-employed, or have other income sources. About 70% of taxpayers traditionally over-withhold, leading to refunds. While it may feel good to receive a refund, adjusting your withholding to better match your taxes can improve your budget by increasing your monthly take-home pay.
For those who earn income not subject to withholding like rental properties, self-employment, or gig economy work, it is advised to make quarterly estimated tax payments. This proactive approach can help you avoid owing a significant amount or facing penalties at tax time. The IRS offers various convenient payment options, including online, by phone, or through the IRS2Go app.
Remember, life events like marriage, childbirth, job loss or natural disasters can significantly impact your tax situation. Adjusting your withholding to reflect these changes is essential for maintaining financial stability. These changes often require adjustments in withholding to reflect your new financial reality accurately. For instance, marital status changes or the addition of a new family member can significantly impact your tax obligations. Similarly, job loss can introduce new tax considerations, such as the implications of unemployment compensation. In the case of natural disasters, especially in federally declared disaster areas, specific tax laws can help in your financial recovery.
In summary, taking a moment to check and adjust your tax withholding before the year ends can make a significant difference. With the IRS’s tools and guidelines, tailoring your withholding to your current life situation is simpler and more effective than ever.
Remember, our team of professionals is always here to assist you with any tax-related queries or needs.
Source: www.irs.gov/newsroom/avoid-a-surprise-next-year-review-tax-withholding-now-before-time-runs-out