No one likes to owe money after filing their return, but you also may not like the idea of having a large refund. Having a large refund is money that could have been in your pocket earlier in the year.
Adjusting your withholding could help with these issues.
Adjust if necessary
Taxpayers should periodically review their tax situations and adjust withholding, if appropriate.
The IRS has a withholding calculator to assist you in conducting a paycheck checkup. The calculator reflects tax law changes in areas such as available itemized deductions, the child credit, the dependent credit and the repeal of dependent exemptions. You can access the IRS calculator here: https://www.irs.gov/individuals/tax-withholding-estimator
Life changes
There are some situations when you should check your withholding. In addition to tax law changes, the IRS recommends that you perform a checkup if you:
- Adjusted your withholding last year, especially in the middle or later part of the year,
- Owed additional tax when you filed your 2021 return,
- Received a refund that was smaller or larger than expected,
- Got married or divorced,
- Had a child or adopted one,
- Purchased a home, or
- Had changes in income.
You can modify your withholding at any time during the year, or even multiple times within a year. To do so, you simply submit a new Form W-4 to your employer. Changes typically go into effect several weeks after a new Form W-4 is submitted. (For estimated tax payments, you can make adjustments each time quarterly estimated payments are due. The next payments for 2022 are due on September 15, 2022, and January 16, 2023.)
Plan ahead now
There’s still time to remedy any shortfalls to minimize taxes due for 2022, as well as any penalties and interest. Contact your Rudler, PSC advisor at 859-331-1717 if you have any questions or need assistance. We can help you determine if you need to adjust your withholding.
RUDLER, PSC CPAs and Business Advisors
This week's Rudler Review is presented by Jonathan Peul, Staff Accountant and Janna Fitzwater, CPA.
If you would like to discuss your particular situation, contact Jon or Janna at 859-331-1717.
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