There are few things more unpleasant than reaching the end of the tax year and realizing you owe much more than anticipated, or that you should’ve been paying quarterly taxes or that you could’ve earned less over the year instead of giving the government an interest-free loan! In 2018, taxpayers are feeling the first effects of the tax reform bill, which means that a mid-year check-up is more important than ever.
One of the biggest changes as a result of tax reform was the amount that employers should be withholding for their employees. The revised W-4 was not released until the year already started, and there was a great deal of confusion over whether or not employers were required to distribute or collect the new forms. The IRS has begun to give out notices to taxpayers to make sure that they are adequately withholding from each check.
Overall, most taxpayers will see a reduction in the taxes that they owe, but the amount of their refund or owed tax will depend on how many pre-payments were made and how much they were for. The mass confusion around withholding this year could give you a big surprise when April 2019 rolls around. If you aren’t sure whether or not you’re withholding enough, a mid-year check-up is in order. This will also allow you to adjust your 3rd quarter and 4th quarter estimated tax payments for the best possible result.
Don’t Wait Until Tax Time
There are many life changes that alter how much you’ll owe on your taxes, and it isn’t a good idea to wait around to see exactly what effect they will have. What types of changes also warrant a mid-year check-up?
- Getting married or divorced, or becoming widowed
- A change in jobs, or one spouse starting to work
- A noticeable increase or decrease in income
- A substantial gain from stock sales, investment assets or bond sales
- Selling or buying a rental property, primary residence or vacation home
- Starting, acquiring or selling a business
- Making substantial business purchases
- Receiving an inheritance
- Having a child
- Withdrawals from a pension plan, IRA or retirement account
Consult Your Advisor for Tax Planning Advice
If you aren’t sure if you should be making quarterly tax payments or need help assessing your estimated taxes, you should contact Miles Tax Advisory today. We can work you through all of your options and help you determine what to do. We are always here to assist you!