How and Why to Change Your Tax Withholdings

Author: Tammy Doss

If you are recently employed again or just getting started – Excellent for YOU!  This is an important moment in your career advancement to not only explore your creative opportunities but think of your future.  As you ponder the exciting new developments that will be happening in your new role you will also want to think of the future.  Don’t miss out on your personal and financial opportunities that might exist.

With that in mind, I would suggest taking a serious look at your tax situation:

1. What was your Tax Burden – last year and this year?

2. Did you owe the IRS or the State, and if you did why?

3. What can you do about planning ahead for 2024/2025 taxes?

Tax Burden (How much do I owe?) for last year vs. this year.  Did you owe more on your last year’s tax return than you had predicted?  Why?  What do you need to do about it?  Is adjusting your tax withholdings enough to cover the taxes for the next year? * 

IRS or STATE – Understand where you underpaid and modify your payroll deductions to accommodate the income you are making so you pay in the appropriate amounts to each taxing agency. *

Planning 2024/2025 Taxes- If you plan on a significant salary increase or making a big purchase, be sure to take advantage of the tax write offs such as a Home Purchase or Solar Panels. Deductions can be taken off your tax return for multiple reasons.  Expanding a family and caring for an elderly family member are examples– You will need to do some personal research. *

*Always, defer to your tax professional who has the most current information.

1. I owed more (Tax Burden) this year – First Figure out how much more you will make or hope to make.  Err or the high side to cover what you will owe to avoid penalty taxes and late Estimated Tax Payments.  Contact your tax professional and they will help you adjust your withholding and give you advice on how to manage your investments to cover the taxes.
   

2. Many things factor into what you owe the taxing authorities.  Did you inherit money or win the lottery or sell property or ??? – these are tax issues that are not always predictable so you will have to adjust your withholding, consider your tax options, and always contact your tax professional for serious advice on how to manage your windfall.
   

3. Thinking ahead is always a great option.  Optimists think that they will have more vs. less and it is the best route to take.   Don’t over invest in the IRS or State but do invest in yourself by not paying in more than you owe.  The penalties are extreme for late or underpayments.  You don’t want to pay in the money you can invest and earn interest on for your own future.  However, they are your tax dollars, so keep them in a savings account if you don’t owe taxes to the taxing agencies.

Our team at the Job Shop is always looking out for your best interest.  If we can be of help give us a call!