How did you do this tax year? Did you get a refund? Did you owe? Some folks look forward to getting large refunds. Others grind their teeth at making an interest free loan to the government.
So here’s the deal. If you want to adjust your Federal Income Tax withholding, up or down, the IRS has created a tool to help you. It’s called the IRS Tax Withholding Estimator. (https://www.irs.gov/individuals/tax-withholding-estimator)
This online tool helps you decide how much to have withheld for 2022 and beyond. It guides users through the process of checking their withholding to help determine the right amount to withhold. Once you have determined how much to withhold, you can fill out a new W-4 to file with your employer. (https://www.irs.gov/forms-pubs/about-form-w-4)
Generally, individuals need to consider increasing withholding if they have more than one job and/or have other sources of income that don’t normally have withholding. (Stock Broker accounts, Rental Income, etc.) These could cause you to be taxed at a higher marginal tax rate. (You gotta love how our tax law is already socialist in nature…make more money, pay a higher rate of tax. Now how does that old socialist slogan go? “From each according to his ability to each according to his need.”)
Another impact on your final amount owed or refunded, is credits (child, earned income, child-care, education, energy, etc.)
One final thing. If you have experienced a change in your status, that can impact future tax. Got married? Got divorced? Have a new baby? (birth or adoption) Child turned 17? Will you be Itemizing instead of taking the Standard Deduction? (Changes in mortgage interest, charitable giving are usually the items that might cause this, but also, if you just started living in an assisted living facility that provides onsite nursing care.)
One additional benefit of the “IRS Tax Withholding Estimator” is that it creates all the forms you will need to fill out when preparing a new W-4. This is HUGE! In all my 40 plus years as an accountant, I have NEVER seen such a convoluted mess as the current W-4. Any help you can get there will be much appreciated!
Before you log onto the IRS website to use this “IRS Tax Withholding Estimator” you should have gathered some basic information. Such as your most recent pay stub(s); Information on other income sources, etc.
There are a few folks who really should NOT use this “IRS Tax Withholding Estimator”. If you are a non-resident alien (use Notice 1392 instead); you have a very complex tax situation, which might include Alternative Minimum Tax, Net Investment Tax, Qualified Business Deduction, etc. (In that case, sit down with your friendly CPA, who has access to some really good tax projection software.)
Have you heard? Prov 11:1b says, “…but accurate weights are his delight.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com Also on Facebook.