Did You Owe the IRS this Year?

There are many reasons taxes change from year to year requiring proactive adjustments to obtain your desired outcome. Review of your current and near future situation should be as much a part of tax season as completing your tax returns.

What to Consider

Did you owe more to the IRS than you expected? Maybe you received a large refund? There is an underpayment penalty for a balance of $1,000 or more that applies in most cases. Additionally, a large refund may be a missed opportunity for you to have earned interest instead of leaving it with the government earning nothing. Until recently it might have not seemed like you were missing much, but with interest rates now in the four percent range, a large refund that earned no interest for the year might not be the best choice.

Have you adjusted your withholdings to better match your desired outcome for next year?

If you find the process of updating your withholding allowances or adjusting estimated tax payments a bit confusing, you are not alone. Making changes is not difficult but does require a bit of time, calculations, an understanding of last year’s results and what is likely to change for the current year.

Some Items that Could Result in Adjustments

• Do you have a child turning 17 this year? If so, there is normally a loss of the child tax credit.
• Did you get married the end of last year or are planning to get married this year?
• Did you welcome a new child into your family?
• Do you have a child who will be attending college or a private school this year?
• Are you a household with two earners and one earns significantly more than the other?
• Did you start or close a business? Did you get a 1099-NEC last year or fill out a W9?
• Did you start or are you planning to start receiving Social Security?
• Did you receive or sell any digital asset, such as crypto currency?
• Are you a Day Trader?

What You Should Do

Your tax professional and their office want to help you make accurate adjustments during the year to help you achieve your desired outcome for next year. BE proactive and contact your tax professional for a review and any recommendations of adjustments that should be made.

Tax professionals want to hear from you sooner rather than later.

If you are looking for a tax professional, please reach out to discuss how we can help you.