There is a point (or multiple points) every year when I write about how it is a good idea to stay on top of your tax picture. Yet, there are so many people who never do this. On one hand, it is understandable why this happens because many people have the same tax situation year after year. Even those people, though, tend to have some point in their life when things change, even if it is a change that just leads into another extended period of normalcy. In this year that has been anything other than normal, though, I think it is again time to bring up this idea.
For those of you out there who have not experienced any financial changes, I am so happy to hear that and hope you have gratitude for your thankful situation. For everyone else, though, it may be time to get on top of things so that another unpleasant surprise doesn’t enter your life in six months.
As always, life changes such as marriage and new children can change how much you will have to pay in taxes. In a lot of these cases, too, it means you will have to pay less. So wouldn’t making some adjustments now and getting more money be a good idea?
This could also be the case for many people who are making less money than they were at the beginning of the year. Sure, we hear about lots of people unfortunately trying to get by on unemployment benefits, but there are also many people working less than they were in January. There is just a huge chunk of people who could do with a little extra money in their take-home pay.
Even in the best of times, we can only get a best guess as to answers when it comes to these matters. The numbers we estimate now will not be the actual ones come the end of the year. It is still much better than going into things blind, though.
The best place to get a start on this is with the IRS’s own tax withholding estimator - https://www.irs.gov/individuals/tax-withholding-estimator. This is a more powerful tool than it was in recent years as it attempts to take in more of your whole tax picture than just how much you are paid in one job. With its answers, you can see if you are withholding enough for tax purposes or withholding too much for tax purposes. With that knowledge, you can then speak to your payroll provider and go about making adjustments to bring things in line with where you want them.
Granted, the chances that this makes any huge week-to-week difference is slim. But small changes can still be positive ones, especially in this time when pertinent knowledge can feel tough to come by. So, grab onto it when you can in the areas where you can.
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To ensure we don't make the folks at the IRS ornery, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.