It’s mid-year again and due to changes resulting from the 2017 tax act together with the changes in the withholding tables made by the administration last year I’m again going to recommend checking a projection of your withholding or estimated payments against an estimate of income through the end of the year as soon as possible. I know that many of you were taken a bit by surprise last year come filing time.
By checking your withholding through the year you can make sure enough is being withheld from your paycheck (if you are a W-2 employee). If you have a small business and file schedule C we should make sure that your estimated tax payments will be enough to avoid any unwanted penalties due to underpayment. Here are a few things to consider and why checking mid-year is important:
Checking withholding and estimated payments mid-year allows us the opportunity to get back on track and avoid penalties. Life changes can make a difference.
Changes include things like:
Marriage, divorce or death of a spouse
Birth or adoption of a child
Purchase or sale of a home
A new job or loss of job
Retirement, both planned and unplanned – it happens.
Be aware some taxable income is not subject to withholding. People with significant amounts of this type income and who also have W-2 income may want to take the opportunity to adjust the amount of tax their employer withholds from their paycheck. This includes income from things like:
Self-employment and side gig income
IRA distributions, including certain distribution from Roth IRAs
If you have a small business and file schedule C and your business income has been unexpectedly good this year we should take a look at that to see if your quarterly estimates need to be adjusted or advise you on how much to set aside as the year goes on. Some life changes might affect your itemized deductions or tax credits as well. These changes include things like:
Changes in medical expenses compared to last year
Changes in real estate taxes or sales tax paid on a significant purchase
Significant gifts to charity
Dependent care expenses
Child tax credit
Some people are more DIY or hands on than others, and for those individuals the IRS provides tools with which you can check your withholding and estimated payments yourself. For those of you who are concerned that they may not be having enough withheld this year or have had changes in your situation and would rather someone else do your check-up I can do it for you. Give me a call or send me an email, I’m here to help.