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Review Your Withholdings Before Year End

November 28, 2023

Did you get married in 2023? Did you recently buy a home? Start a new job? These are just three reasons you will want to review your withholdings. We have the details here.

Another filing season is quickly approaching! It is wise to review your withholdings now to avoid a potential surprise when you file next year. You could owe a large tax bill if too little is withheld, and potentially incur penalties for underpayment. If too much is withheld, you could be receiving a smaller paycheck. Here are some considerations.

5 Reasons to Adjust Withholding

  1. Family changes- Family changes including marriage, divorce or children will impact your taxes.
  2. Employment changes- If you experience a significant change in your income, such as getting a raise, starting a new job, or receiving additional income from a side business, you may want to adjust your tax withholding to ensure you're paying the appropriate amount of taxes.
  3. Lifestyle changes- Did you recently buy a home? Certain tax deductions available to homeowners (mortgage interest deduction, property tax deduction, etc) will reduce your overall tax liability, hence changing your withholding.
  4. Financial changes- Did you receive an inheritance? Did you get a big bonus? Any significant changes to your financial situation might trigger a withholding adjustment.
  5. Tax planning purposes- Some individuals choose to adjust their withholding to align their tax payments with their overall tax strategy. If you're aiming for a specific tax refund amount or trying to minimize your tax liability throughout the year, you may want to modify your withholding accordingly.
  6. Tax law changes- Tax laws and regulations can also change over time, potentially impacting your tax liability.

How do you know if your withholding is correct?

If you're unsure whether your withholding is correct, you can use the IRS withholding calculator to estimate your tax liability and adjust your withholding accordingly. Consulting your tax professional is always a good idea, too!

You can adjust your tax withholding by filling out a new W-4 form with your employer. The W-4 form will allow you to adjust the amount of taxes withheld from your paycheck.

Download our Year End Tax Planning Guide for Individuals for more information on what’s to come in 2024. Questions? Contact us.

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