While April 15 is traditionally “tax day” in the U.S., taxpayers are really responsible for paying taxes throughout the year. Whether you are a W-2 employee who has taxes withheld from your paycheck, or a self-employed business owner or partner who makes quarterly estimated tax payments, Uncle Sam insists on getting paid on a regular basis.
The trick is to make sure you are not paying too much or too little in taxes. If you regularly receive a tax refund, that means you may have been paying too much every quarter, or having too much money withheld from your wages. Employees can ask the company’s HR or payroll department to adjust the withholding amount, and estimated tax payers can simply adjust the amount they send to the IRS each quarter.
On the other hand, if you continue to receive a “surprise” additional tax bill when you calculate your taxes, you may need to boost your withholding or increase your estimated payments.
The IRS offers three tips to help prevent tax time surprises:
- New Job. When starting a new job, an employee must fill out a Form W-4, Employee’s Withholding Allowance Certificate. Employers use this form to calculate how much federal income tax to withhold from regular pay, bonuses, commissions and vacation allowances. The IRS Withholding Calculator tool is easy for taxpayers to use to figure how much tax to withhold to avoid surprises.
- Estimated Tax. People who have income not subject to withholding may need to pay estimated tax. Those expecting to owe $1,000 or more than taxes withheld from their wages may also need to make estimated tax payments to avoid penalties. The worksheet in Form 1040-ES, Estimated Tax for Individuals, helps to figure the tax.
- Life Events. A change in marital status, the birth of a child or the purchase of a new home can change the amount of taxes a taxpayer owes. The Managing Your Taxes After a Life Event page on IRS.gov provides resources to explain the tax impact of these changes. In most cases, an employee can submit a new Form W–4 to their employer anytime.
If you have any questions on the amount you should have withheld from your wages, or how to calculate your estimated tax payments more accurately, please contact the Gray, Gray & Gray Tax Department at (781) 407-0300.