According to financial experts, it may be time to change your withholdings if you received a surprise tax bill during this filing season. It’s crucial to review withholdings throughout the year, especially if you recently had a drastic transition in your life.
Reasons to Adjust Your Withholdings
Here are a few good reasons why you should keep an eye on your withholdings and adjust it before you get an unexpected tax bill:
Tax law changes
Life changes in one’s lifestyle, such as marriage, divorce, or having children
New occupations, side jobs, or unemployment
Shifts in tax deductions and credits
Family changes are one of the most common reasons to adjust your withholding. When you say those two big words and/or bring a newborn into the world, it becomes a game-changer for your taxes.
Other lifestyle changes, such as purchasing a home, may affect your status if you itemize deductions, as you may be able to deduct mortgage interest, resulting in a smaller payment.
Generating the Correct Withholding Adjustment
There are three ways to calculate the correct adjustment to your withholding. The IRS offers a Withholding Calculator, which you may find below in the “Resources” section on the IRS site that will give you a highly precise estimate if you enter a lot of data.
You can also use the IRS’s “Deductions and Adjustments Worksheet” that comes with the W-4 form to figure out your deductions and adjustments. Last but not least, To figure out how many additional exemptions you should claim, divide your additional deductions by the exemption amount for your tax year and round down.
An annual tax refund may be appealing to many Americans. Overpaying during the year, though, may become more costly as the economy turns, according to analysts. With rising interest rates, earning almost nothing on certificates of deposit and savings accounts may become obsolete.
How Simple Is Qualifying?
Considering that the Fresh Start Program is a federal program, you would think meeting the qualifications may be very difficult, but really, it’s a lot simpler and quicker than you think. Take the following steps in order to find out if you are eligible in as little as 3 minutes.
- Fill out some basic information about yourself and your back taxes here.
- Have a representative reach out to you to discuss your eligibility.
- Go through the enrollment process and finally reduce or eliminate your tax liabilities.