The steps you take now can help ensure that next year’s tax bill isn’t a major hassle. Follow these quick steps for a withholding review, and you’ll be in a better position to avoid problems popping up down the road.
Important Tax Withholding Items to Review
Every good tax planner will tell you that reviews are important. But lately, these check-ups have become even more pressing. Your tax obligation has likely gone through some changes due to changes in the tax code.
Some of the more significant updates will relate to your children and other dependents. In order to forecast a more accurate number for what you’ll owe for the 2022 tax year, remember that the credits are going to be lower than what they were in 2021.
The Child Tax Credit is returning to $2,000 (the same amount from 2020) for each child. As a result, you may have a $1,600 drop in credits for each of your children. The dependent care credit is also going down. This means that daycare expenses will likely affect your tax obligations in different ways.
Of course, all of the standard reasons for a withholding review are still in place. Major life events always call for a closer look at your tax planning. Whether it’s a job change, selling property or buying a home, welcoming a new baby into your family, getting married, getting divorced, or having a death in the family—all of these situations can dramatically impact how you’ll want to approach your withholdings.
Checking Your Withholdings—and Potential Adjustments
One of the best options for your withholdings review is to check out the online tool that’s been organized by the IRS. You can reference the IRS Withholding Calculator to help calculate exactly how much to withhold. Their instructions are relatively straightforward and all you need to have is a copy of your last tax return and either your most recent paycheck or Form 1040 ES. That being said, it’s usually a lot easier to simply pass that work to the professionals for suggestions that are even more personalized to your needs.
The calculation changes that the IRS has implemented for its recommended withholdings aren’t always that clear, but they’re still helpful to cross-reference. If you notice any discrepancies with that information and your current withholdings, then you’ll want to fix your plan of action by completing a new W-4 form for your employer. Or, for quarterly estimated taxes, look at making adjustments for next quarter. If you have any questions along the way, just reach out to your local accounting firm.
Get a Tax Professional to Take a Look!
Let’s make sure the money you’re meant to keep stays in your own pocket throughout the year. There’s definitely a happy medium when navigating your state and federal withholdings.
You don’t want to overpay and give the government an interest-free loan. You’re also probably looking to avoid having a large sum to pay with your next tax return filing. We can help you stay on track. Feel free to give our team at NSO & Company a call if you’d like to schedule a withholdings review. We’d be happy to help!
