Why You Owed the IRS Money on Your Taxes and How to Fix It
“People often think they’re making a lot of money, but they’re not saving any of it for taxes,” Steber says. “And then they owe a lot of money at the end of the year.”
So how can I fix this for next year?
Steber recommends checking in with a tax professional to review my W-4 and make sure my withholding aligns with my financial situation. He also suggests taking advantage of tax-planning software or calculators to estimate my tax liability and adjust my withholding accordingly.
Stanfield stresses the importance of updating my W-4 whenever my circumstances change to avoid any unpleasant surprises come tax season. And if I have a side hustle, he advises setting aside a portion of my earnings for taxes to prevent a hefty bill down the line.
While I may have been blindsided by my tax bill this year, I’m determined to take control of my financial future. By being proactive and staying informed, I can ensure that next tax season won’t bring any unpleasant surprises.
So, while I may not be getting that dream vacation this year, at least I’ll be better prepared for the next tax season. And that’s something worth celebrating.
Lesson learned.
Self-employed taxpayers often find themselves responsible for making quarterly estimated tax payments to the IRS. Failure to do so can result in owing a significant amount of money at tax time, along with potential underpayment penalties. To avoid these surprises and penalties, it is crucial to adjust withholding as soon as possible.
One way to adjust withholding is by filing a new W-4 form with your employer’s HR department. The IRS provides a withholding calculator on its website, where you can input information about your income sources and family size to determine the appropriate withholding amount. By adjusting the additional withholding on line 4(c) based on the amount owed on your taxes, you can ensure that enough taxes are being withheld from your paychecks.
It is also important to account for any side hustles or additional sources of income when adjusting withholding. By making these adjustments, you can avoid having a large tax balance due at the end of the year.
You do not have to wait until tax season to make changes to your withholding. It is recommended to do a midyear tax checkup to ensure that enough taxes are being withheld from your paychecks. By comparing your year-to-date earnings with your estimated total income for the year, you can determine if adjustments need to be made to your withholding.
Ultimately, taxpayers have the power to control their tax situation by adjusting their withholding accordingly. By taking proactive steps to ensure that enough taxes are being withheld throughout the year, you can avoid owing a large sum at tax time and potentially incurring penalties. It is important to stay informed and regularly review your withholding to prevent any surprises when it comes time to file your taxes.
