Hello from Unique Tax Accounting! We’re an accounting firm that has been providing quality tax and accounting services for over 20 years. In this video, we’re going to discuss how to prepare and revise your withholding plan for the upcoming tax season.
The Internal Revenue Service encourages taxpayers to use the end of summer as an opportunity to review and update their tax withholding or payment plans to avoid surprises next year. While many taxpayers receive refunds, some may unexpectedly owe taxes due to life or job changes for which they haven’t adjusted their withholdings properly. This is particularly important for gig economy workers, individuals with side jobs, or anyone with income that is not subject to withholding. These taxpayers should review their payments and withholdings to ensure they can adjust their tax liability accordingly. The IRS provides a tax withholding calculator to help you assess how much you should withhold compared to what you actually owe, saving you time and frustration later.
The U.S. tax system operates on a pay-as-you-go basis. Most people have taxes withheld from their paychecks by their employer, who then sends that money to the IRS. Those working gig jobs need to make their own estimated quarterly payments since taxes aren’t withheld for them. Typically, taxpayers receive refunds if they’ve overpaid throughout the year.
Recent IRS data indicates that two-thirds of taxpayers received refunds in 2024, totaling nearly $270 billion, with an average refund of about $2,900. Conversely, some taxpayers face estimated tax penalties for underpayment or missed payments, which can add up to significant amounts. Adjusting withholdings or making estimated payments can help avoid these penalties, which is crucial for the self-employed, those with multiple jobs, or anyone experiencing major life changes. The IRS encourages taxpayers to use the tax withholding estimator this summer to align their withholdings or estimated payments with their actual tax obligations.
You can find the estimator at irs.gov. This tool will help you determine the appropriate amount of federal income tax to pay throughout the year. To use it, gather the most recent pay stubs from all your jobs, information from any side jobs or investments, and a copy of your 2023 tax return. The estimator will allow you to calculate how much federal income tax withholding you need, see how that withholding affects your refund or take-home pay, and choose an amount that meets your needs.
If you need to make adjustments, you can fill out a new W-4 form and submit it to your employer, or adjust your estimated payments. For significant life changes, such as starting a new job, major income changes, marriage, childbirth, adoption, or buying a new home, using the estimator can help keep you on track. For more complex situations, consult Publication 505, which covers tax withholding and estimated payments. Or, of course, contact us at +17169068976 Here at Unique Tax Accounting, we are always here to help. You can schedule a consultation to discuss your specific tax situation.
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