Surprises can be fun – just not necessarily when it comes to your taxes. A bigger refund can be a welcome surprise – but what if you get back less than you expected? What if you wind up owing the IRS? Here are four things you can do to ensure you’re paying the right amount of income tax throughout the year and getting all the money you deserve in your refund.
Update your W-4
Anytime you start a new job, you fill out a Form W-4 Employee’s Withholding Allowance Certificate. Your employer uses the form to figure the amount of federal income tax to withhold from your pay based on things like your marital status and number of dependents. Certain major life events (marriage, the birth of a child, etc.) can impact how much tax should be withheld from your paycheck. If you need to account for a major change in your personal situation, you should be able to submit a new Form W–4 anytime. If you are unsure how much of your income should be withheld, use the IRS Withholding Calculator on IRS.gov to help you fill out the form accurately.
Pay your estimated tax
If your income is not subject to withholdings, you may need to pay estimated tax. This is typically the case when you are self-employed or have significant income from rental properties or other investments. Estimated income tax is usually paid in four installments over the course of the year. Learn more about estimated tax.
Know about the latest tax law changes
The Tax Cuts and Jobs Act was signed into law in Dec., 2017 and most of the new laws took effect on Jan 1, 2018. It is the most significant tax reform since 1986, and it includes some pretty major changes to the tax code.
Major reforms like these don’t happen very often, but smaller adjustments can still take place from one year to the next. You can receive automatic updates about tax law changes when you create a free account with TaxSlayer. Stay informed to avoid any surprises when you file.
Report changes in your circumstances
If you purchase your health insurance through the Marketplace, you may be eligible for the premium tax credit to offset the cost of coverage. You might even choose to receive the credit early, instead of with your tax return.
If you do receive the advance credit and you experience a change – like getting a new job, getting married, or having a child – you will need to report your changes in circumstance to the Health Insurance Marketplace. You should also notify the Marketplace when you move out of the area covered by your current plan. Reporting changes will help you get the proper amount of financial aid.