By Some people are surprised to learn they’re due a large federal income tax refund when they file their taxes. Others are surprised that they owe more taxes than they expected. If this has happened to you, then it’s time to check your federal tax withholding or payments.
Here are some tips to help you bring the tax you pay during the year closer to what you’ll actually owe–and avoid a tax surprise when you file your 2013 tax return next year.
Wages and Income Tax Withholding
- New Job. When you start a new job, your employer will ask you to complete a Form W-4, Employee’s Withholding Allowance Certificate. Complete it accurately to figure the amount of federal income tax to withhold from your paychecks.
- Life Event. Change your Form W-4 when certain life events take place such as a change in marital status, birth of a child, getting or losing a job, or purchasing a home. Any of these life events impact the amount of taxes you owe. Typically, you can submit a new Form W-4 at any time during the year.
- Federal Withholding Calculator. Use our handy online financial calculator to help you figure the correct amount of tax to withhold based on your situation.
Simply go to the “Resources” section of our website, click on the Financial Calculators, and look for Should I Adjust My Payroll Withholdings?.
Self-Employment and Other Income
- Estimated tax. This is how you pay tax on income that’s not subject to withholding. Examples include income from self-employment, interest, dividends, alimony, rent and gains from the sale of assets. You also may need to pay estimated tax if the amount of income tax withheld from your wages, pension or other income is not enough. If you expect to owe a thousand dollars or more in taxes and meet other conditions, you may need to make estimated tax payments.
- Form 1040-ES. If you think you might owe estimated taxes on a quarterly basis, use the worksheet in Form 1040-ES, Estimated Tax for Individuals. Don’t hesitate to contact us if you need help filling out Form 1040-ES, we’re happy to assist you.
- Change in Estimated Tax. After you make an estimated tax payment, some life events or financial changes may affect your future payments. Changes in your income, adjustments, deductions, credits or exemptions may make it necessary for you to refigure your estimated tax.
- Additional Medicare Tax. On January 1, 2013, a new Additional Medicare Tax went into effect. The 0.9 percent Additional Medicare Tax applies to an individual’s wages, Railroad Retirement Tax Act compensation and self-employment income that exceeds a threshold amount based on the individual’s filing status. For additional information on the Additional Medicare Tax, please call our office.
- Net Investment Income Tax. A new Net Investment Income Tax also went into effect on January 1, 2013. The 3.8 percent Net Investment Income Tax applies to individuals, estates and trusts that have certain investment income above certain threshold amounts. Please give us a call if you need additional information about the Net Investment Income Tax.
Questions about federal tax withholding? Give us a call today. We’ve got answers.