You can still adjust your 2012 tax withholding to avoid large tax refunds or tax bills when you file your returns next year. Though some people look forward to a big refund check, wouldn’t it be better if you could keep more of your money in your pocket? Adjust your tax withholding soon to bring the amount of taxes you pay closer to what you actually owe.
Most companies withhold taxes from each employee’s paycheck. The other common scenario is that people, especially the self-employed, pay taxes on a quarterly basis through estimated tax payments.
But each year millions of Americans have far more taxes withheld from their pay than is actually required. This can create stress during refund time for people who need their refunds to make major purchases or pay debts. If possible, taxpayers should avoid relying on a tax refund to make a major financial choice, especially if it is time sensitive.
Here are some additional tips to help make the taxes you pay during the year closer to what you will owe when you file your tax return.
If you are a regular employee…
When you start a new job, you will complete a W-4, Employee’s Withholding Allowance Certificate. This form is used to calculate the amount of federal income tax that will be withheld from your paychecks. Make sure you complete this form as accurately as possible.
Changing your W-4 to reflect certain life events can also help make what you pay for taxes closer to what you owe. Examples of life events that may affect your taxes include purchasing a home, obtaining or losing a job, getting married or having a child. Make sure you keep your W-4 up-to-date.
Usually, you can submit a new W-4 whenever you’d like to increase the number of withholding allowances. But if a life event causes you to decrease your withholding allowances or change your marital status from married to single, you are required to provide a new W-4 within 10 days of that life event.
If you are self-employed…
If you are self-employed and think you will owe $1,000 or more in taxes for the year, you normally must make estimated tax payments to cover your income tax, Social Security and Medicare taxes. The worksheet in Form 1040-ES, Estimated Taxes for Individuals, will help you determine if you are required to pay estimated tax on a quarterly basis. Making estimated payments will help you avoid paying a large lump sum at tax time.
If you’d like to speak with a Beaton Accounting tax representative for professional advice on your taxes, call us today for a FREE consultation: 631-921-6894.
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