Taxpayers should stay on top of taxes all year to avoid a surprise tax bill
The next tax season seems far away, but this is actually the perfect time for taxpayers to review their withholding and estimated tax
payments. Because federal taxes are pay-as-you-go, it’s important for
taxpayers to withhold enough from their paychecks or pay enough in
estimated tax. If they don’t, they risk being charged a penalty.
Adjust tax withholding
For
employees, withholding is the amount of federal income tax withheld
from their paycheck. The amount of income tax an employer withholds from
an employee’s regular pay depends on two things:
- The amount they earn.
- The information they give their employer on Form W–4.
All taxpayers should
review their federal withholding each year to make sure they're not
having too little or too much tax withheld.
Individuals can use the IRS Tax Withholding Estimator
to help decide if they should make a change to their withholding. This
online tool guides users, step-by-step, through the process of checking
their withholding, and provides withholding recommendations to help aim
for their desired refund amount when they file next year.
Taxpayers can check with their employer to update their withholding or submit a new Form W-4, Employee's Withholding Certificate.
Make estimated payments
Taxpayers may need to make quarterly estimated tax payments in a few situations:
- If the amount of income tax withheld from a taxpayer's salary or pension isn’t enough.
- If they receive income such as interest, dividends, alimony, self-employment income, capital gains, prizes and awards.
- If they are self-employed.
More information:
Pay as You Go, So You Won't Owe
Estimated Taxes
Form W-4, Employee's Withholding Certificate
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