April 16, 2020

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

As a W2 earner, you have the option to change your withholdings on your paycheck to either earn more or less. As a taxpayer, it is important to understand the repercussions you could potentially face for you adjusting your withholding and how it could affect you when it comes time to file your taxes. 

Here is everything you need to know about withholding and what you need to be aware of:

Your withholding is determined by several factors:

  1. The amount of income that you have earned.
  2. Your filing status – either the single or married rate.
  3. Number of withholding allowances claimed. With each claim you add on, it reduces your withholding amount.
  4. Additional withholding – an employee can request through their employer to withhold an additional amount from their paycheck. 

How your withholding could affect you:

  1. Withholding too little on your paycheck could lead to you owing a tax balance.
  2. You could be withholding too much. If this is the case, you will receive a refund once you file your tax return.
  3. Your income increased but your withholding stayed the same. You could potentially owe come tax time, make sure to see if your income bracket has changed and consult with a tax professional to see what you can do to avoid owing money or having your refund reduced when you file your taxes.

What you can do to avoid running into tax trouble:

  1. Use a tax withholding estimator to check if you are withholding the most accurate amount. The IRS provides a calculator for taxpayers to use.
  2. Consult with a tax professional to discuss what your withholding options are and what you can do moving forward to ensure you won’t run into any issues come tax time.

If you need tax help, contact us for a free consultation.