when our living circumstances change, our tax obligations also change and we
end up paying less or more in taxes to the IRS. When you pay too much in taxes,
the IRS issues you a refund; when you don’t pay enough in taxes, you will have
a tax debt. When you’re paying estimated taxes, it’s important to accurately determine
the amount of taxes you owe so that you don’t pay too little.
When you take
a new job, it’s the responsibility of your employer to calculate the amount of
tax to be withdrawn from your pay. You’ll be asked to fill Form W-4, Employee's
Withholding Allowance Certificate, and based on this form your employer will
calculate and remove the amount you elect to have withheld from each paycheck. You
can double-check how to correctly fill out this form by using the IRS
Withholding Calculator on the IRS website - irs.gov.
If, on the
other hand, you’re self-employed, receiving income from interest, dividends, or
rent, you’ll be paying estimated taxes. Usually, you’ll need to pay these taxes
quarterly, at specific intervals throughout the year. In order to calculate
your estimated taxes properly, you may use the worksheet in Form 1040-ES,
Estimated Tax for Individuals. Remember that paying more is always safer than
There are also
life events that change your personal, tax or financial status. Should you have
a change in your marital status, the birth of a child, buying a new home,
caring for a dependent, etc. then you should make the necessary changes in your
Form W-4. If you’re paying estimated taxes, recalculate your figures
accordingly. You can usually submit a new Form W–4 anytime.
receiving advance payment of the premium tax credit in 2014, you need to report
items such as changes in your income or the size of your family to the Health
Insurance Marketplace. Also, you must notify the Marketplace when you move out
of the area covered by your current plan. Timely reporting of changes ensures
that you get the appropriate financial assistance.
Labels: Tax Filing, Tax News, Taxpayers