How to Avoid a Tax Surprise
Nobody likes a surprise at tax time. For people who are not self-employed, a good way to ensure your payroll withholding is accurate is to review your most recent paystub and use the IRS tax withholding estimator tool. The tool is designed to help people review payroll withholding amounts and project the amount of refund or taxes owed at year-end. Using this tool can help eliminate future unwanted tax surprises and make changes to your payroll withholding when your financial situation changes mid-year.
Not sure if you need to change your withholding amount? Here is a quick list of common reasons people have material changes in their taxes during the year.
Recently married or having a baby
Child or dependent turning age 17
Change in contribution amount to an employer sponsored retirement plan
Buying or selling a home
Making sizeable charitable contributions
You or your spouse are recently retired