Have you ever been surprised to receive a greater refund than you expected? Or have you been flabbergasted to find out you owe more taxes than you thought?
Wonder why? The answer is to take look at your current situation. Have you been recently married or had a child? Was there a change in your income? Major life events such as these can affect your taxes. It is important to keep the taxes you have to pay as close to the amount of taxes you owe. Here’s some advice to help you maintain your taxes:
With every new job, comes piles of forms to fill out. One crucial form is the W-4, Employee’s Withholding Allowance Certificate, which you will need to provide to your employer in order to determine the amount of federal income tax that will be withheld from your paycheck.
If your income is determined as non-withholdable, you may be required to pay estimated tax.
Self-employment, dividends, rent or interest may count as income. You may have to pay estimated tax if you think you owe $1,000 or more. Estimated tax will generally have to be paid four times a year. To determine estimated tax, you can use this worksheet in Form 1040-ES for individuals.
From marriage to divorce, to having a family and even to retirement, these life events can significantly affect the amount of taxes you may owe. Take a look at this list of life events that can impact your estimated taxes or require a change on your W-4 Form.
Change in Circumstances
Are you getting advance payments of the premium tax credit? If you are and if there are any changes in your family size or income, you should definitely report these changes to your Health Insurance Marketplace. Also, be sure to let the Marketplace know if you move out of the area that your current Marketplace plan covers. You can pay for your insurance through the Health Insurance Marketplace with the advance payments of the premium tax credit you receive. By being proactive at reporting any changes, you will help yourself obtain the accurate type and amount of financial aid to avoid receiving either too little or too much in advance.
Below is a video explaining the premium tax credit in depth: