IRS Recommendation – Take These Steps by Summer’s End to Avoid Unpleasant Tax Surprises

The IRS recently issued an important reminder to millions of American taxpayers: now is the perfect time for an “end-of-summer” tax checkup. This proactive step can save you from an unpleasant tax surprise when 2025 rolls around. By addressing your tax situation now, you’ll avoid potential issues that could significantly impact your tax liability.

Tax Checkup

Not everyone gets a tax return check from the IRS, and some taxpayers may even owe more than they expect. This is especially true for those who have experienced recent changes in their personal or financial lives. If you fall into any of the following categories, a tax withholding review should be at the top of your to-do list:

• Recent Job Change: If you’ve started a new job, your withholding amounts may need adjusting to match your new income level.
• Income Changes: A significant increase or decrease in income can affect your tax obligations, potentially leading to a higher tax bill.
• Marital Status Changes: Getting married or divorced alters your tax filing status, which can impact your tax liability.
• New Parents: Having a child introduces new tax credits and deductions, but also changes your overall tax situation.
• New Homeowners: Buying a home brings new deductions, but also new financial responsibilities that can affect your taxes.

If you’re in any of these situations, it’s crucial to check if your current tax withholding is sufficient. Failing to do so could result in a large tax bill when you file your taxes next year.

Key Groups

In addition to those who have experienced major life changes, the IRS also highlights other groups who should be especially vigilant about their tax situation. This includes:

• Gig Economy Workers: If you’re part of the gig economy or have a side hustle, your income may not be subject to tax withholding. This means you might owe more taxes than you realize.
• Self-Employed Individuals: Like gig workers, self-employed individuals must estimate and pay their taxes throughout the year, as they don’t have taxes automatically withheld from their income.
• Investors and Retirees: Those who earn income from investments or retirement accounts should also keep a close eye on their tax withholding or estimated tax payments.

The goal for everyone is to ensure that the taxes you pay during the year closely match what you owe. This helps you avoid either owing a large sum in April or receiving a smaller-than-expected refund.

How to Check

Fortunately, the IRS makes it easy to review and adjust your tax withholding. The best tool for this is the IRS Tax Withholding Estimator, which you can find on their official website. This tool allows you to enter your financial details and get an estimate of whether your current withholding is sufficient.

Here’s a simple guide to using the tool:

1. Gather Your Financial Information: Before using the estimator, gather your recent pay stubs, last year’s tax return, and any other relevant financial documents.
2. Input Your Information: The estimator will ask for details like your income, filing status, and any adjustments or credits you expect to claim.
3. Review the Results: The tool will give you an estimate of how much tax you’ll owe based on your current withholding. It will also provide recommendations on how to adjust your withholding if necessary.
4. Update Your Withholding: If the estimator suggests changes, you can update your withholding by filling out a new W-4 form with your employer.

Benefits of Acting Now

By taking the time to review your tax withholding now, you can avoid the stress and financial burden of an unexpected tax bill next April. It also gives you time to make any necessary adjustments to ensure your taxes are on track, saving you both time and frustration in the long run.

Remember, the sooner you take action, the better off you’ll be when tax season arrives. Don’t wait until it’s too late—take advantage of the IRS tools available to you and make sure you’re prepared.

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