It Might Be Time To Do A Paycheck Checkup
Because of the winter storms in February, Louisiana residents and business owners have had their state tax deadline and their federal income tax deadline extended to June 15th.. There is a fair chance that you may not have filed yet for the 2020 tax year. When you do and you know what your tax refund or bill will be, it may be time for a paycheck checkup.
Who should do a paycheck checkup?
A paycheck checkup is done to check your withholdings and to make sure you’re not significantly overpaying or underpaying your payroll taxes with every paycheck.
The IRS provides a Withholding Calculator that anyone can use, but it is especially recommended for taxpayers who experienced some of changes described below.
You changed your withholdings
If you changed jobs or changed your withholdings in the middle of the year, those changes might have worked for you for the months remaining in the tax year, but those same withholdings might have a different impact if the withholdings stay as they are for an entire tax year.
You got a bigger than expected tax bill
If you owe more than expected on your 2020 taxes, you will want to revisit your withholdings to avoid another big bill on the 2021 taxes.
Your refund wasn’t quite what you thought it would be
If you got a refund that was smaller or larger than you expected, you will want to change your withholdings with your employer.
You had a life change
Got married, had a child, adopted a child, bought a house? All of these life events can impact your taxes, and you can adjust your withholdings to reduce any surprises on next year’s income tax filing.
The IRS Withholding Calculator
The Withholding Calculator estimates the withholdings that are right for your situation. Using the Withholding Calculator for your Paycheck Checkup can go a long way to helping your tax planning in preparation for next year’s federal tax filing.
It is recommended that you have recent pay stubs from all jobs or from both spouses’ employers, documents for any other income you may have, and your last tax return when using the Withholding Calculator.
Sidenote for the self-employed
For self-employed individuals who don’t pay taxes through a payroll withholding, the IRS encourages you to use the Withholding Calculator. The calculator will help you to determine if you should pay an estimated tax each quarter.
How do you change your payroll withholdings?
Once you’ve done a Paycheck Checkup, you can decide if you want to change the withholdings that come out of your paycheck.
To change your withholdings, talk to your employer or employer payroll department; they will have the form for you to complete. You can change your withholdings at any time during the year.
For help with your income tax planning and preparation, taxes, give us a call.