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Tax Withholding: Determine the Right Amount for You

As one year ends and another begins, most of us aren’t thinking about filing our upcoming individual or business tax return: we’re in merriment mode!

CPAs, of course, celebrate differently than everyone else …they know the holidays are the ideal time to prepare for tax season. And one item every taxpayer should review is his or her paycheck tax withholding.

While fixing your withholding won’t help your tax situation for the previous year, it will ensure you’re set for the new year.

Much like Goldilocks, taxpayers often struggle to find a withholding amount that’s “just right.”  Withhold too little and you’ll owe money; withhold too much and you’ll be waiting for your refund. Resources such as the IRS Withholding Calculator are available to calculate the correct amount to withhold.

Events such as starting a new job, marriage, divorce, welcoming a child or buying a home are good times to recalculate your withholding, as these occasions can impact the amount you owe. Additional resources, such as Publication 505: Tax Withholding and Estimated Tax, are available to taxpayers.

If you need to change your withholding amount, you must provide a new Form W-4 to your employer. Be sure to give your employer a new form within ten days of an event that decreases the number of withholding allowances you can claim, such as a divorce, or you may owe a lot more at tax time than you were expecting.

Bottom line: you can change your withholding any time during the year your personal situation changes your expected tax liability. Your goal should be: the amount you withhold comes as close as possible to your actual tax liability. Or as Goldilocks would say, “Just right!”

If you need assistance with this topic or other accounting issues, the tax accountant team at Patrick & Robinson CPAs can help. Contact us at (904) 396-5400 or Office@CPAsite.com.

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